Time and time again I am involved in cases that involve disputes where one family member claims ownership over an asset or item of property left by a deceased parent and the remainder of the family members argue that the asset or property belongs to the estate and was never meant to be a gift to a particular family member. What to do?
Common estate planning techniques include the transfer of assets into joint ownership. While the intention of such gratuitous transfers may be to avoid probate fees, other legal consequences should be considered to avoid unintended results. Assets can be held jointly with the intention to create an immediate gift of the beneficial interest in property. Alternatively, the gift may only relate to “the right of survivorship”. Often, joint-ownership is not intended to be a gift at all, only a means to facilitate the management of an asset. A failure to properly document this intention creates a risk that this intention will not be carried out.
Right of Survivorship to Bank Accounts
If there is a sincere intention to gift or transfer property then a transferor needs to carefully consider what rights are intended to be transferred and whether these rights are intended to be gifts, or are being held on a resulting trust. A resulting trust arises when title to property is registered 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. In determining the beneficial ownership of a jointly held asset, it is the intention of the transferor that is paramount. Importantly, these intentions need to be documented so that no dispute can arise as to their intention at the time the transfer took place.
The common law has created presumptions as a guide for courts in resolving disputes over transfers where evidence as to the transferor’s intent is unavailable or unpersuasive. It is important to note that these presumptions are rebuttable based on the specific facts and evidence available.
The most important presumptions can be summarized as follows:
1. Upon a gratuitous transfer of property, it will be presumed that the transferee holds the property upon a resulting trust in favour of the transferor’s estate.
2. The presumption of resulting trust applies to a gratuitous transfer between a parent and an adult child, but not to a transfer between a parent and a minor child.
Gifting the Right of Survivorship in Real Property
The Court of Appeal for Ontario has reaffirmed that the addition of a non-contributing party (such as a son or daughter) as a joint tenant in land is not, by itself, evidence of an irrevocable gift.
Things to Consider
Deeds of Gift are an easy way to document an intention to gift, whether it is an immediate gift of the beneficial interest in property or a gift of the right of survivorship. Trust agreements should be considered where assets, particularly accounts, are transferred into joint names for ease of man- agement without any intention to gift.
While formal documentation and independent legal advice are the best way to ensure the trans- feror’s intention is carried out, less formal documents, such as a Declaration of Intention, can be equally effective. The intention of the transferor must be proven on a balance of probabilities. If this threshold cannot be met, the legal presumptions will prevail.
Documenting the intention of the transferor not only ensures that the transferor’s estate plan is carried out, but also serves as evidence to the Canada Revenue Agency so that probate need not be paid where assets properly pass outside of an estate.