When a gift may not be a gift

Consider the following scenario: an aging parent gives one of three adult children a significant amount of money prior to passing away. Can the two children who were left out insist the money be repaid to the parent’s estate after the parent dies? What if the child receiving the funds insists it was a gift?

And what about jointly held property with right of survivorship? For a variety of reasons, including avoiding probate, a parent may hold property, such as a principal residence or bank account, jointly with their child. After the parent passes away, the issue of ownership could arise. The surviving child and joint owner may claim the property is now theirs; however, other children in the family might not agree, especially if a will provides for equal distribution of the parent’s other assets.

The 2007 Supreme Court of Canada case Pecore vs. Pecore affirmed that a gratuitous transfer of an asset or property into joint ownership from a parent to their adult child is presumed to be held by the child in what is called a resulting trust. When the parent passes away, the asset must be given back to the parent’s estate, unless the child can provide evidence the parent intended to gift the asset to them at the time of transfer.

The determination of ownership of assets in these situations continues to be litigated in families. Let’s consider the cases below.  

Banking documents for joint accounts deemed insufficient as evidence of intent

The 2023 Ontario case Renwick Estate and Miller vs. Stanberry involves a mother who, for many years prior to passing away in 2018, held several bank accounts jointly with one of two daughters. The total value of the accounts was $128,241.41.  

The daughter claimed the mother intended that she receive the proceeds of the accounts, and as the surviving account holder, the accounts should belong to her. The other daughter’s position was that the accounts were assets of the mother’s estate.

The primary evidence put forward to establish that the mother intended to gift the accounts was the signature cards created when the accounts were set up. The cards showed the mother had checked off a survivorship option.   

However, the court noted that more than a signature card is required, and indicated that checking off a box, or other language in banking documents explaining survivorship, was insufficient evidence to establish that the individual creating the joint account truly turned their mind to gifting the account to the joint account holder.

The court determined there was little evidence of the mother’s true intentions regarding the accounts. It determined that all the joint accounts were estate assets and should be treated as such.

Actions establishing joint ownership of property helped support intent

The 2024 British Columbia case Chung vs. Chung involves a father who died in 2018, leaving four surviving adult children. His will provided that his estate was to be divided equally among them. However, in 2008, the father added his son as a joint owner of his condominium, valued at $688,000. It had been owned with his spouse, the son’s mother, who died in 2012.

The son testified his parents promised he would receive their condo and other accounts when they died, in exchange for him moving back to Canada from China to care for them. However, his siblings disagreed and claimed he was holding the assets in a resulting trust for their father’s estate.

The court noted that on the day the parents signed wills in 2008, they also signed a property transfer document that added the son as a joint owner of the condo. The court determined that the property transfer document, in itself, is consistent with a specific intention that the property be dealt with outside the will. The court also reviewed an affidavit by the lawyer who drafted the parents’ wills and found it was likely the lawyer explained the nature and effect of joint tenancy to them, including that the condo would become the son’s sole property after their deaths.

The court determined the parents signed the property transfer document knowing it would give the son full ownership of the condo upon their deaths and with the intention of gifting it to him.

Signed gift letter, advisor testimony helped support intent to gift a specific cash advance

The 2024 Ontario case Playford vs. McRae involves a father with cancer who gave his son several cash amounts over about 20 months. The father passed away in 2017. Prior to the father’s death, the son received a cheque for $98,000, $500,000 from an investment account, and 89 separate e-transfers from the father’s bank account totalling $178,000.

The father’s daughter claimed the funds received by her brother were void and subject to a resulting trust. The brother’s position was that the father intended to gift the funds to him and that there was evidence to corroborate this. The primary issue the court considered was whether the father had the intention to gift the cash amounts to the son.

The court found that only the $500,000 was a valid gift. It reviewed a gift letter signed by the father, as well as testimony from the father’s investment advisor that on the day of the transfer, the father was “quite intent” on transferring the funds and provided direct and clear instructions to the advisor.

The court noted that the brother’s testimony was often the only direct evidence provided of the father’s intentions. It determined that the evidence he provided to corroborate his claim of a gift for the other cash amounts was either not credible or insufficient.

Takeaway

Instead of resorting to court action, families can reduce the likelihood of conflict in such situations. Help clients consider doing the following:

• Clearly document the intention to gift a specific asset/ownership interest to a specific child.
• Communicate with all children who are beneficiaries, not just the one receiving the asset, about the intention to make a gift.
• Communicate to you, the financial advisor, the intention to make a gift, as well as to the estate planning lawyer, and request associated documentation.

Akua Carmichael

Tax & Estate

Akua Carmichael, LL.B, J.D., TEP, is vice-president, Estate Planning and Services, with Estate Stewards. She can be reached at acarmichael@estatestewards.com.