Presumption of Resulting Trust

Is a Gift a Gift?

The case law has developed two different presumptions that address whether or not a transaction before the death of a testator 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 that the property has to be returned to the estate and is distributed through the Will.

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

The presumption of advancement (i.e. a gift). This presumes that 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

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. in any transfer not from parent to minor child or to spouse (Pecore v. Pecore 2007 SCC 17)(Pecore).

The Presumption of Resulting Trusts

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 transferee holds the property in trust for the transferor). The transferee or recipient of the property bears the onus of proving otherwise. In other words, the transferee must prove the property was actually intended to be a gift.

The Supreme Court of Canada case of Pecore set 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 has been rebutted.

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

Summary

Until the decision of Pecore, transfers to a minor child or a spouse were most often considered gifts. Other transfers are viewed with caution. Following Pecore, there must be evidence to establish the transfer was clearly intended to be a gift where a minor child or spouse is not the person receiving the gift.