When a parent gifts property to their adult child, it is very important to ensure that the gift is documented; otherwise, the gift may end up reverting back to the parent’s estate after the parent has passed away. The Supreme Court of Canada’s seminal decision in Pecore v Pecore, 2007 SCC 17 clearly establishes that the law does not assume a gift when parents transfer property to their adult children. Rather, such transfers are subject to the presumption of resulting trust, meaning that the onus is placed on the adult child to rebut the presumption and prove that a gift was intended.
Ferguson Estate (Re), 2025 ABCA 94, a new decision from the Alberta Court of Appeal, explores whether evidence of a close relationship with a parent can be used to rebut the presumption of resulting trust, or, to put it more precisely, whether such evidence can be used to corroborate a gift. The mother in this case owned a corporation which received royalty income from oil wells located in Texas. In 2010, two of the mother’s children were appointed as directors of the corporation, with each child receiving 1% of the corporation’s shares. The mother was also a director of the corporation and held the other 98% of the shares.
In 2014, the mother executed a power of attorney, which named one of her daughters, who was also a director in the corporation, as her attorney. On the same day, the mother also executed a will. One clause directed that royalty revenue generated by the corporation’s oil wells was to be shared equally among all four of the mother’s children on a monthly basis after she passed away. The next year, the mother was declared mentally incompetent.
Two years later, in 2017, the attorney had the mother’s corporate shares transferred into her name at the corporation’s annual general meeting. The mother then passed away a year later.
After the mother’s death, her attorney, who held 99% of the shares of the corporation, claimed that the mother had actually given the corporation to her back in 2010, when she still had capacity. However, there was no documentation confirming that a gift had been made in 2010 – none of the mother’s shares in the corporation had been transferred to the attorney at that time, and there was also no deed of gift. The mother also continued to report the income earned by the corporation for tax purposes after making the alleged gift.
The issue of ownership of the corporation was eventually put to the Court of King’s Bench of Alberta: see Estate of Dora Agnes Ferguson, 2024 ABKB 770. Justice Nixon concluded that the attorney had failed to rebut the presumption of resulting trust; as a result, she held the shares in trust for the benefit of her mother’s estate, and under the terms of the mother’s will, the royalty revenue generated by the corporation was to be shared equally between all of the children.
The attorney appealed, alleging that circumstantial evidence and fair inferences could be used to corroborate the gift and rebut the presumption of resulting trust. A particularly interesting argument made by the appellant before both the Court of King’s Bench and the Court of Appeal, was that a gift could be inferred as a result of the appellant’s close relationship with her mother, both personally and economically. The close nature of the relationship was demonstrated by the fact that the mother had named the appellant in both her personal directive and her power of attorney, and had also made her a director of the corporation. In presenting this argument, the appellant cited the case of Cashman v Sank, 1950 CanLII 509 (AB CA) for the proposition that a court can take a close relationship into account as a circumstantial factor to corroborate the assertion of a gift. The Court of King’s Bench of Alberta did not reject the attorney’s argument out of hand, but noted that Cashman v Sank involved partners in a business relationship and that other evidence of a close relationship, such as a business or economic link, would be more important for determining whether a gift had been made.
The Court of Appeal upheld the conclusion reached by the Court of King’s Bench, confirming that Justice Nixon did not make a palpable and overriding error in concluding that the circumstantial evidence presented by the attorney was insufficient to rebut the presumption of resulting trust. The Court offered a variety of reasons to support this conclusion, including the fact that there was no deed of gift, and that the attorney did not report an increase in her income for income tax purposes after the gift was allegedly made. It would have been necessary for her to report such an increase in income had the shares, in fact, been given to her.
It is interesting to note, however, that the Court of Appeal did not close the door on the possibility of a close relationship between a transferor and a transferee, involving a business or economic link, being used to corroborate a gift and thereby rebut the presumption of resulting trust. Only time will tell whether this argument will be utilized again in the future, and whether it may one day be possible to rebut the presumption of resulting trust by establishing a close relationship between a transferor and transferee.
Have a wonderful rest of your day,
Suzana.