Jointly held property and resulting trusts

 
A recent decision from the Ontario Superior Court of Justice should serve as a warning for common-law couples to maintain separate assets if they don’t want to share them upon separation, says Vaughan family lawyer Paul Mazzeo.
 
“For common-law spouses, property is split according to ownership, unlike married spouses, where there is the presumption that everything is split evenly,” says Mazzeo, principal of Mazzeo Law.
 
“Common-law couples should be aware that if they don’t want assets split in half, and if the assets are actually one person’s property, they should be held that way.”
 
A cohabitation agreement is another way to ensure the property remains in the hands of the intended spouse, Mazzeo says.

Chechui v. Nieman, 2016 ONSC 1905 (CanLII), dealt with the ownership of a jointly owned house and a joint investment account worth $1 million between a couple who were engaged but later split up. The ex-common-law wife, the applicant, claimed 50 per cent ownership in both, while the ex-common-law husband, the respondent, claimed his wife held her interest in the home and the account in trust for him.
 
The respondent’s mother provided $1.7 million toward the purchase of the home while the applicant obtained a mortgage for the remainder of the purchase price.
 
After his mother died a short time later, the husband paid off the mortgage and opened a joint investment account, the decision says.
 
Considering the evidence, Justice Kenneth Hood sided with the wife with respect to the house and with the husband with respect to the investment account.
 
“The respondent was making a claim that although the assets were held jointly with his wife-to-be, he said she was just holding it in trust for him, meaning it was all his, even though they owned the assets jointly,” says Mazzeo, who comments generally on the case.
 
Specific evidence on how each asset was obtained was important to the decision, he says.
 
The judge considered evidence from a financial advisor to whom the respondent explained how he wanted the money invested and how he wanted to collect investment income.
 
“It was clear that it was really his money and set up as a joint account, not as a gift to her, but with the intention that if he passed away, the monies would be transferred to her,” Mazzeo says.
 
However, the same argument didn’t hold for the property.
 
The judge ruled that no resulting trust claim could be made with respect to the $1.7 million gift provided by the respondent’s mother, and the mortgage was given on the strength of the applicant’s income. Considering evidence from two lawyers the mother consulted prior to giving the money to her son, the judge said it was clear the money was intended as a gift to both.
 
Mazzeo says this situation likely wouldn’t be much different if the pair were actually married before the split.
 
“While there are some differences with treatment of the matrimonial home, exclusion doesn’t apply, so I don’t think the outcome would be different.”
 
Still, Mazzeo says the case highlights the potential dangers of holding joint property if the intentions aren’t made clear from the beginning — and put in writing. “You could end up losing a significant amount of money,” he says.
 
For more family law news and information please visit http://www.mazzeolaw.ca/

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