Trevor Todd and Jackson Todd have 60 years combined experience in dealing with contested estate matters.
A thorny problem that frequently arises is whether monies advanced from parent to a child is a gift , a loan or a trust.
In Pecore v. Pecore, 2007 SCC 17 the Court considered the presumption of advancement in the context of a gratuitous transfer from a parent to one of his adult children and whether it was a gift or a loan.
In that case, an ageing father gratuitously placed his mutual funds, bank account and income trusts in joint accounts with his daughter, who was one of his adult children. The father alone deposited funds into the accounts. Upon his death, a balance remained in the accounts. The daughter took legal title of the balance in the accounts through the right of survivorship. Her siblings asserted that their father made the gift intending that she would hold the assets in the accounts in trust for the benefit of his estate to be distributed according to his will.
The question before the Court was whether the father intended to make a gift of the beneficial interest in the account upon his death to his daughter alone or whether he intended that his daughter hold the assets in the accounts in trust for the benefit of the estate.
The Court found that the father intended to make a gift of the beneficial interest in the account upon his death to his daughter alone.
The dispute engaged the concepts of the presumptions of resulting trust and the presumption of advancement as discussed in paras. 20-21, 24, 27:
20. A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner
21. Advancement is a gift during the transferor’s lifetime to a transferee who, by marriage or parent-child relationship, is financially dependent on the transferor
24. The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended . This is so because equity presumes bargains, not gifts. para.
27. The presumption of resulting trust is the general rule for gratuitous transfers. However, depending on the nature of the relationship between the transferor and transferee, the presumption of a resulting trust will not arise and there will be a presumption of advancement instead [citation omitted]. If the presumption of advancement applies, it will fall on the party challenging the transfer to rebut the presumption of a gift. para.
As a result of Pecore, there is no presumption of advancement where the gift is from a parent to independent adult children.
A gift is a gratuitous transfer made without consideration.Two requirements must be met for an inter vivos gift to be legally binding:
- The donor must have intended to make a gift and must have delivered the subject matter to the donee. The intention of the donor at the time of the transfer is the governing consideration.
- In addition, the donor must have done everything necessary, according to the nature of the property, to transfer it to the donee and render the settlement legally binding on him or her: McKendry v. McKendry, 2017 BCCA 48 at para. 31; Pecore at para. 5).
The evidence of intent “must be relevant to the intention of the transferor at the time of the transfer” (Pecore at para. 59).
Evidence of intention arising subsequent to the transfer may be relevant to the intention of the transferor at the time of transfer, but “[t]he trial judge must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention” (Pecore at para. 59).
“Once a gift has been made of an interest in real property or any other type of property, the gift cannot be revoked – whether the transferee takes as a joint tenant or tenant in common”: Bergen v. Bergen, 2013 BCCA 492 at para. 41.
