Pursuing the Return of an Asset Transferred Before Death

The person receiving the property keeps it regardless of the terms of the Will

Legal precedents in Canada have developed two different presumptions that address whether or not a transaction before the death of a will-maker is a gift or simply property of the estate held in trust. The former means the person receiving the property keeps it regardless of the terms of the Will. The latter means the property has to be returned to the estate and gets distributed through the Will.

Depending on the relationship between the recipient and the deceased, one of following presumptions will apply:

1. The presumption of advancement (i.e. a gift). This presumes the property was an outright gift to the person who received it. This presumption applies when the transfer is from a deceased parent to a minor child or to a spouse; or
2. The presumption of resulting trust. This presumes the recipient of the property holds the property in trust for the estate. Thus, the estate of the deceased remains the beneficial owner of the property. This presumption applies generally whenever there is no presumption of advancement (i.e. any transfer not from parent to a minor child or to a spouse).

The Presumption of Resulting Trusts

The law of equity presumes that a transferor would not deliberately give property away. Thus, when property is transferred for little or no money or “consideration”, equity presumes a trust (i.e. it presumes the recipient holds the property in trust for the transferor). The recipient of the property bears the onus of proving otherwise. In other words, the recipient must prove the property was actually intended to be a gift.  The Supreme Court of Canada case of Pecore v. Pecore (2007) 1 SCR 795 set out the rule that the onus is on the person receiving the property to prove on a balance of probabilities that the transfer was a gift.

Rebutting the Presumptions

The critical time for looking at whether or not the transaction was a gift is around the time it was made.  The presumption of resulting trust may be rebutted by declarations made by the deceased at or before the date of transaction or by the surrounding circumstances. That is, if there is evidence that shows that the intention of the transaction was to provide a gift then the presumption of resulting trust will be successfully rebutted.

Evidence of dependence by the recipient on the deceased would be considered as strong evidence to rebut the presumption of resulting trust. Evidence about the relationship between the recipient and the deceased can be used to rebut the presumption of resulting trust. Evidence subsequent to the transfer is also often considered in rebutting the presumption of resulting trust although it is reviewed with caution.

In real estate transfers, often a solicitor generating the Land Title Registry documents to allow the testator to transfer the real estate outright or into joint tenancy to another person often drafts a “Deed of Gift” which is a legal document that states the transaction is a gift. If such a document is created, the presumption will be rebutted in most cases.

Other issues that come to the forefront on a transfer are unjust enrichment, undue influence and mental capacity. These topics are discussed elsewhere in this book.

Assets Subject to Wills Variations Claim