Rising real estate prices leading to rise in estate litigation, says B.C. lawyer

Family members squabble over estates as property prices soar into the millions, Josh Woods says

Rising real estate prices leading to rise in estate litigation, says B.C. lawyer
Josh Woods, Clark Woods LLP

Mom or Dad may have made very specific bequests in their will, but it appears estate litigation is on the rise among family members due to soaring real estate prices in some hot markets. And many of these disputes are happening even before dear ol’ mom or dad passes, says B.C. lawyer Josh Woods.

“It’s incredible,” he says. “I’ve seen and heard people who come to the hospital room and say, hey ‘Dad, I’m sorry to see you go, but could you sign this new will.’ And that’s usually a new will in their favour.”

He says that estate battles can be as bitter as family law cases in terms of animosity. It doesn’t happen to everyone, but “I’ve heard of cases where people aren’t told about funerals; people are finding out by reading the obituaries,” he says. “Often these issues relate to how much money people think they have coming to them, or what they think they deserve.”

Woods, who is a litigation lawyer with Clark Woods LLP in Coquitlam, says he has seen the number of court battles rise in connection with higher real estate prices, especially in areas such as Vancouver, where a parent might have bought a single-family, detached home in the 1960s for well under $100,000, but it’s now worth a few million.

That’s precisely one circumstance Woods has to deal with, a case where a home purchased for $50,000 in 1961 sold for $3.1 million in 2020.

“It was a teardown, and the value was just in the property. All right,” he says. “So, you can see how the parties involved might be more willing to hire lawyers and fight things out in court,” he says. “Litigation is expensive, and the higher estate values can make the decision to go to court easier.

“People may not go to court over a property that is worth, say, $500,000, but if you attach another zero to that, you can see why the temptation is there.”

As an example, an individual may have willed a vacation cabin to one child but left their main home in a bigger city to another child. “It might have been fairer at the time it was drawn up, but 15, 20 years later, the dramatic increase in real estate prices in one area might make the inheritor of the lesser-valued property think the will is no longer fair.”

While Woods has noticed increased litigation over estates in the past 18-24 months, he’s not sure whether any of that can be linked to the pandemic. “More likely it has to do with skyrocketing real estate prices.”

He also clarifies that his observations are anecdotal, and he has not been able to find hard figures on how much litigation over estates is rising. “All I know is that I can see this is a trend.

“It seems to me that people are aware of what the housing market is doing in the lower mainland. I am seeing a rise of people essentially fighting over a pot of gold at the end of the rainbow. A lot of times it happens even before people have left us.”

Deciding how to resolve these cases can be complicated, Woods says. For example, a child who inherits a more significant portion of the estate, specifically the house, may have been the child who lived closest to the parent and did much of the caregiving in later years. The house owner might want to add a child to the title to ensure that someone keeps track of taxes or upkeep.

“There’s a sentimental attachment to the house, they want to own it still, but they no longer have the capacity of shouldering that burden alone,” Woods says. “And so, we’ll see those transfers happen may be years before the person dies.”

He adds what that does is create a lot of confusion between family members in terms of what constitutes part of the estate and what doesn’t. And given the amount of money involved, “there’s been a significant rise in distrust between family members.”

Another issue that has come up in litigation is whether a property is held in joint tenancy with one of the siblings in the family, often for reasons of estate planning. It passes on outside the rest of the estate, avoiding probate fees and the executor’s fee on that amount.

“But does it also mean that person holds the property in trust for their siblings, even though they are the sole owner as a result of joint tenancy?”

In a situation where one sibling inherits property under joint tenancy, while the liquid assets willed to the others are subject to probate fees, Woods says: “You can see the other children saying, ‘well hold on, how is that fair and equitable distribution.' "

Woods notes that probate fees are typically payable upfront before the inheritor has access to the estate funds. “It can be a real burden to come up with those fees.”

Often these disputes can happen for the most innocent of reasons, Woods says. He points to cases where an individual with a sizable estate says in the will to “leave everything to my kids equally” and then in the same will, put assets into a joint tenancy with one of the children, diverting holdings out of the estate.

“It wasn’t done with malice; it was simply an issue of not planning things in a way that the kids understand, and you’re left with the image of a will that is essentially meaningless.

Woods also brings up the emotions that family members have when a parent passes away, and there is a feeling of unfairness about how things are divided. “There’s often a ‘mom loved you’ best thing going on, and people can react irrationally when it comes to the estate.”

He brings up a case where two siblings fought bitterly over how to divide the gas money needed for a trip to visit a property that was to be inherited. It was a negligible amount in the larger scheme of things, but Woods says it became the focal point of all the emotion and bitterness between them.

As well, Woods wants to stress that being “fair” in dividing an estate doesn’t necessarily mean being “equal.” A person drawing up a will can divide an estate based on who he or she feels has more need or is perhaps more deserving. And while B.C. law makes it virtually impossible to cut a child out of a will entirely, there is precedent for passing on more assets to one child more than another.

The key in B.C. law as to whether a parent has met or not met a moral obligation to an adult child is whether the parent has provided in the manner of a “judicious parent” – that is to say, does the provision meet the current societal norms?

In Ontario, it is a bit different, as the Ontario Court of Appeal confirmed in Spence v BMO Trust Company that, "if your children are independent adults, there is no obligation to leave anything to them in your will.”

That is why, Woods says, it is essential for someone who doesn’t have a will to talk to someone to make things easier down the line. And for those who have a will already, it might need updating to account for rising real estate prices.

It’s probably also not a bad idea, he says,  to let children know key elements of a will so that there are no surprises, and perhaps less anger at family when the parent passes away.

“Losing a parent is always hard, but the bitterness of learning of details of a will that don’t go the way you thought they would can also be very hard.”

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