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Fraudulent Conveyance and Inheritance

Senior lawyer discusses gifts given by a person during their lifetime with the intent to thwart their spouse’s rights under the Family Law Act. Included in this is an analysis of the Fraudulent Conveyance Act and the case called Stone v. Stone.

Transcript

So Mr. Smith has gone through some tests and he’s going with his wife to the doctor to find out what the results of the test are. They sit down and he says, “Mr. Smith, I have some very bad news for you. You’re going to die. And you have just a few days to get your affairs in order.”

And Mr. Smith and Mrs. Smith start to cry. She’s breaking down uncontrollably. She says, “Honey, I love you more than my own life. I wish it was me, not you.”

And he puts his hand on hers and he says, “I love you”. I’ve always loved you and don’t worry. You’ll be able to soldier on without me.”

And she’s sobbing. And then he says to her, “Honey, you know from my first marriage I have 3 kids and I’d like you to take care of them.”

And she says, “Dear, I love those kids like they’re my own. But if you’ve messed me over in your will, I’m going to exercise my rights under the Family Law Act. I’m going to elect to take an equal division of net family property and I’ve got to protect myself.”

Mr. Smith is saying, “What happened to my wife who loved me? What happened to my wife who wanted to go first?”

He immediately leaves the office. He goes to his lawyer and he says, “Johnny, when I’m alive I can do whatever I want with my money. And I’m still here. I’m not dead yet. Give my house to my son. Right now transfer it to him. Give my cottage to my daughter. This minute!” And the million dollars I have in the bank account, I want you to transfer it right away to my mistress. I’m not leaving one penny for my wife!”

So we laugh.But, in a case called Stone v. Stone, the judge, at trial, and the Court of Appeal said:

If a spouse makes inter vivos transfers in order to thwart the legitimate rights of a spouse under the Family Law Act. Those inter vivos transfers are fraudulent conveyances.

And in Stone v. Stone the judge clawed it back so that the wife could make her claim under the Family Law Act.

What if it wasn’t her rights under the Family Law Act? What if it was a dependant under the Succession Law Reform Act? A child who was left out of the will but would be considered a dependant. Could you claw that back as a fraudulent conveyance? What if it was a right under a domestic contract? Could you claw that back as a fraudulent conveyance? That’s why these sort of things end up in court.

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This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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