Adding a child on title to a property or as a joint account holder on a bank account is a common estate planning tool used by many with the goal and intention of hoping to avoid the delay in the administration of estates as a result of probate and also the estate administration taxes that arise when submitting an application for a certificate of appointment of estate trustee.
The Supreme Court of Canada in Pecore v. Pecore established and/or solidified the general rule in law that transfers of property and/or gifts from parents to adult children are legally presumed to be held in trust for the transferor’s (i.e. the parent’s) estate unless the transferee (the child) can establish on a balance of probabilities that a gift was intended. If the presumption is not rebutted (i.e. if the child cannot demonstrate that a gift was intended) then the property will result back to the transferor (i.e. the parent) or his/her estate.
Since Pecore there have been many, many cases litigated on this issue – there are 724 cases on CanLII which have relied Pecore. The legal presumption of resulting trust has been held by subsequent, lower courts to be not easily rebutted. A recent of example of this is found in the recent decision of Public Guardian and Trustee v. Cherneyko et al, 2021 ONSC 107 (CanLII) where the Court found in favour of the Public Guardian and Trustee and ordered that the alleged gifts of over $320,000.00 be returned to the transferor. Although this case was not between a parent and a child, the reasons for decision rendered by the Hon. Mr. Justice F. B. Fitzpatrick provide a harsh but realistic overview of the evidentiary issues when attempting to rebut the presumption of resulting trust. For example, at para 37 the Hon. Mr. Justice F. B. Fitzpatrick held as follows:
I disagree with Tina’s assertion that a gift of a quarter of an elderly and frail person’s net worth in proximity to a time when that person is exhibiting serious signs of mental incapacity could be said to be “what Jean wanted”. On the basis of Jean’s physical condition in August 2019, I find she was a vulnerable person at that time. I further find she lacked capacity to gift the substantial sum of $250,000.00 to Tina at that time. Tina has not placed any evidence before the court which could lead to a finding that the gift was a “righteous one”. On the balance of probabilities, I find the evidence on this application does not support a finding that Jean made a $250,000.00 gift to Tina in August 2019. I find Tina received these funds impressed with a resulting trust in favour of Jean.
Contrary to the above, there have been cases where the presumption is successfully rebutted despite the fact that the parent is alive and gives evidence that his/her intention was that the transfer of property was not to be considered a gift. For example, in Nimchick v. Nimchick, 2019 ONSC 5183 (CanLII) the issue was whether Jill Nimchick, the family matriarch, intended to gift 67,000 pounds to her son Bruce, his spouse and her grandson Justice in the summer of 2013. Jill Nimchick gave evidence as part of the trial and alleged that the funds were not intended by her to be a gift. The Hon. Mr. Justice Ryan Bell disagreed preferring the evidence of Jill’s son Bruce and found inter alia as follows:
“…Weighing all of the evidence, I find that the defendants have rebutted the presumption of a resulting trust. I find that Jill transferred the Funds with the intention that they not be returned…
The family dynamic that existed prior to and at the time the Funds were transferred is consistent with Jill intending to gift the Funds to Justin (to pay off his student loans) and to Bruce…
…I prefer Bruce’s testimony to that of Jill as to their discussions at the hospital in July and August 2013, and thereafter. Bruce was clear, consistent, and candid in his testimony about what he and Jill discussed. He was not shaken on cross-examination…
By contrast, Jill’s memory failed her several times during her testimony…
There were significant discrepancies between Jill’s testimony at trial and her evidence on discovery…
Then there is the fact that neither Jill nor Susan requested the return of any of the transferred funds until February 2014, four to five months after the transfers were made, and only after Jill had returned home from the hospital…
In summary, I find that at the time the Funds were transferred, Jill intended to make a gift to Justin to pay off his outstanding student loans, with the balance of the Funds to go to Bruce to be used as he wished…”
As stated by the Hon. Justice Abella quoting Tolstoy in his dissent in Pecore:
Tolstoy wrote at the beginning of Anna Karenina: “Happy families are all alike, every unhappy family is unhappy in its own way.” That unhappiness often finds its painful way into a courtroom.
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