Financial arrangements between parents and adult children made with all good intentions sometimes sadly lead to litigation. Certainly, joint account disputes (i.e. the application of Pecore) dominate the discussion when it comes to this issue.
In short, a presumption of resulting trust will apply to jointly held accounts between a parent and an adult child. Put another way, the law presumes (subject to contrary evidence) that the creation of a joint account imposes an obligation on the surviving joint tenant to hold the proceeds in trust for the deceased parent’s estate.
Likewise, parents may sometimes assist their adult children with the purchase of a house. If they do, a purchase money resulting trust may arise when one person (often, a parent) pays for property, but the title to that property is held by their adult child. The law presumes that the person who provided the funds (i.e. the purchaser) intended to retain an equitable interest in the property, even if they did not hold legal title.
The principles underlying a purchase money resulting trust date back to the early days of the common law. In Dyer v. Dyer (1788), 30 E.R. 42 at 43, 2 Cox Eq. Cas. 92 (Eng. Ch. Div.) the Court stated:
The clear result of all the cases, without a single exception, is that the trust of a legal estate, whether freehold, copyhold, or leasehold; whether taken in the names of the purchasers and others jointly, or in the names of others without that of the purchaser; whether in one name or several; whether jointly or successive, results to the man who advances the purchase-money [emphasis added]
The principles of a purchase money resulting trust were summarized by Kirkpatrick J.A. in Rascal Trucking Ltd. v. Nishi, 2011 BCCA 348, 21 B.C.L.R. (5th) 330, leave to appeal to SCC granted, [2011] S.C.C.A. No. 476, 34510 (April 26, 2012) at paras. 39-42:
Resulting trusts are commonly found where one party has contributed to the purchase price of property but legal title is put in another party’s name. In this situation, equity presumes a resulting trust over the property in proportion to the amount of the monetary contribution. In the American case law, this type of trust is called a “purchase money resulting trust” or “purchase price resulting trust”.
In order to take advantage of a purchase money resulting trust, the claimant must show that he, in fact, advanced the purchase money (or a portion of the purchase money), and that he acted throughout as a purchaser and not as a lender or creditor for the alleged trustee who holds legal title to the property.” [emphasis added].
It should be stressed that a simple determination that a parent advanced proceeds for the purchase of property put in the name of an adult child does not end the enquiry. The title holder may yet assert that the funds were a gift and not a loan. Evidence of intention at the time of the funds being advanced (if available) will usually be determinative of this issue.
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