Estate disputes are an unfortunate yet common reality for many families. When the cognitive capacity of an elderly relative declines, heartbroken loved ones experience added stress which can strain relationships and cause rifts that would not have otherwise occurred.
An issue that sometimes arises in this context is gifts. Determining whether an elderly relative truly intended to gift property or transfer title for some other reason, such as obtaining help managing the property, can be particularly difficult. However, to help assist in these situations, the law has developed the presumption of a resulting trust which will be explored throughout this blog.
The presumption of resulting trust is a legal concept that applies to gifts. According to the Supreme Court of Canada in the 2007 decision of Pecore v Pecore (“Pecore”), if a transfer is made for no consideration (that is, if something is given to someone for nothing in return), the onus is on the person who receives the transfer to demonstrate that a gift was intended.
Normally the burden is on the person challenging a transfer, but the presumption of resulting trust changes this because the law presumes that bargains are made, not gifts given, unless shown otherwise. However, this is a rebuttable presumption, so it is possible for the person receiving the property to show that the person transferring it intended to gift it.
Sometimes, the presumption of resulting trust does not apply. In these cases, there is a presumption of advancement, under which the party challenging the transfer needs to rebut the presumption that a gift was intended.
This presumption of advancement applies to relationships where gifts may be expected to pass between parties. Historically, courts have applied this presumption to transfers from spouse to spouse and parent to minor child. However, in Pecore, the Supreme Court declined to apply the presumption of advancement to transfers between parent and independent adult child. The Court noted that:
“… it is common nowadays for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs. There should therefore be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of that parent’s affairs.”
The recent decision of the Supreme Court of British Columbia in Campbell Estate (Re) shows what can happen when an ageing parent adds a child to a bank account, even if initially for well-meaning purposes.
After the testator’s husband died in 2014, her children became concerned with her increasingly erratic behaviour and thought she may have dementia. For example, despite always being careful with money, she had started carrying large amounts of cash. Karen was a joint account holder of one of her mother’s bank accounts, which she used to pay her mother’s bills.
According to Karen, because of the increasingly erratic behaviour, her children devised a plan to get their names on her other bank accounts to protect their mother from falling victim to scams. Ivan instead testified that his and Arnold’s names were added to some of their mother’s bank accounts to give them the funds in the accounts. Nothing was agreed upon at a tense family meeting with their mother.
Later on, however, Arnold and Ivan were added to their mother’s accounts. Karen noticed that her mother took all the money out of the joint account that she had access to and transferred it to an account with Arnold’s name as a joint owner. On the day the testator died, Ivan withdrew $163,000 from one of the joint accounts.
Karen applied to the Court on behalf of the estate, seeking a declaration that the funds withdrawn by Ivan were held in trust for the estate and asking for their return.
Justice Lyster decided that the principle of resulting trust applied to this situation. Therefore, it was for Arnold and Ivan to show that their mother intended to gift them the funds in the bank accounts. Her Honour found that the testator was:
“… a vulnerable person, in cognitive decline, at risk of being financially exploited… She carried large sums of money on her person. These would all be sound reasons to add [the testator’s] adult children to her bank accounts to protect her from financial exploitation and mismanagement.”
Based on the evidence, Justice Lyster decided that the testator did not intend to gift the joint account funds to her sons.
Her Honour found that Ivan thought that he had been treated unfairly by his mother in the distribution of various properties before she died. Ivan blamed his sister for this and took steps to convince his mother that Karen had been overcompensated. Despite his mother’s cognitive decline, Ivan tried to rectify the situation by taking her to the bank to become a joint account holder. He withdrew the funds just before she died believing that they would be his if he did so.
Justice Lyster found that the testator did not intend to gift the funds. Her Honour ordered Ivan to repay the money to the estate and also ordered that the funds in Arnold’s joint account were to be released to the estate.
The skilled team of estate lawyers at Meridian Law Group provide their clients with advice and representation in all types of estate disputes. Our lawyers advocate for our clients’ interests during stressful and emotional times. They are conscious of the need to preserve relationships where this is viable and prevent unnecessary financial loss to an estate. To arrange a confidential consultation with a member of the team, call (604) 687-2277 or fill out our online form.