Parents, in seeking to financially assist their children, sometimes purchase a home with their own money and register the adult child on title as joint tenant with the parent for estate planning purposes.
The home is then occupied by the adult child with his/her married spouse making the home a matrimonial home. Upon the death of the adult child the home often becomes the subject of a legal dispute between the joint owner parent and the surviving son/daughter in law.
Section 26 (1 ) of the Family Law Act provides that when an owner spouse of a matrimonial home dies and title is held in joint tenancy with a third-party (the parent) the joint tenancy is deemed at law to have been severed immediately before the death of the owner spouse.
In those circumstances the parent and joint owner child are deemed to have owned the home as tenants-in-common with each party having a 50% the divisible interest in the home.
In the event that the surviving spouse does not agree that the home belongs to the parent due to the fact that the home was a matrimonial home the parent has several remedies available to address the issue.
The parent could have a claim against the deceased adult child’s estate either for a claim of resulting trust or in the alternative for unjust enrichment if the parent can prove that he/she funded the purchase of the home.
A resulting trust arises when title to properties are held in the name of a party who gave no value for it.
The parent could pursue a claim based on the argument that the deceased child was holding the home in trust for the parent. The surviving son/daughter in law would have to argue that the parent had gifted the deceased adult child’s interest in the home in order to rebut the presumption of resulting trust.
The parent could also pursue a recovery of the deceased child’s interest in the home on the basis of unjust enrichment.
If the parent can establish that:
- the deceased child received a benefit (i.e. the child’s registered interest in the home free of charge);
- the parent suffered a corresponding loss (the loss of the parents’ payment towards the home as it relates to the deceased child’s registered interest in the home )
- That there was no juristic reason for the benefit and the loss;
The court can award, on the basis of unjust enrichment, a monetary judgment in favor of the parents or award a constructive trust interest in favor of the parents in relation to the deceased child’s interest in the home.
The take away in these circumstances is that parents need to understand the potential legal applicability of section 26 (1 ) of the Family Law act when purchasing homes for the benefit of married adult children.
Barrie Hayes, Partner