Author: Rebecca Rauws
When making testamentary gifts in a Will, if a specific bequest fails for any reason, the assets in question will fall into the residue of the estate. However, if a gift of residue fails, the distribution of whatever assets are affected by the failure will be governed by the intestacy provisions set out in Part II of the Succession Law Reform Act, R.S.O. 1990, c. S.26.
The recent decision of Sabetti v Jimenez, 2018 ONSC 3523 in part considers the interpretation of a residue clause in order to determine whether there is a partial intestacy in respect of the estate of Ms. Valdes.
The applicant, Mr. Sabetti, was Ms. Valdes’ second husband. She had three adult children from her prior marriage. Ms. Valdes’ Will provided that the residue of her estate was to be divided into four equal shares. The first share was to be held in trust for Mr. Sabetti during his lifetime, and on his death, whatever amount was remaining was to fall into and form part of the residue. The remaining three shares were to be transferred to Ms. Valdes’ three children.
Mr. Sabetti claimed that because of the gift-over of his share of the residue, which provides that it is to form part of the residue, the beneficiaries of the first share of the residue were not named with sufficient certainty, and a partial intestacy must result. Ultimately, the Honourable Justice Dunphy concluded that Ms. Valdes’ intention was clear on the face of the will, and found that there was no partial intestacy.
In its decision, the Court goes through an interesting analysis of the residue clause, outlining the rules applicable to construction of documents. Where there are two possible interpretations, one of which creates an absurd result, and one of which is in line with the apparent intention of the maker of the document, the latter is to be preferred. It is also preferable to construe a will so as to lead to a testacy over an intestacy, if it is possible to do so without straining the language of the Will or violating the testator’s intention.
In this case, the Court found that to interpret the term of the residue according to Mr. Sabetti’s position would lead to an absurd result. In terms of Ms. Valdes’ intention, the Court was of the view that the intended beneficiaries of the remainder interest were clearly the other three shares of the residue. The Court found no difficulty in discerning the testator’s intention or in applying it, and was able to read the Will in such a way as to avoid an intestacy.
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Alberta recently passed legislation which will allow for the use of Henson trusts in estate planning in the province. Although Henson trusts are commonly used in Ontario, prior to this new legislation, the law in Alberta provided that the value of an individual’s interest in a trust was to be included in calculating his or her assets for the purpose of determining eligibility under Alberta’s Assured Income for the Severely Handicapped (“AISH”) program, thus preventing the effective use of Henson trusts.
A Henson trust is a type of trust often used here in Ontario in situations where a beneficiary is a recipient of The Ontario Disability Support Program (“ODSP”). An individual’s eligibility for ODSP is determined based on his or her income and assets. The Henson trust has emerged as a strategy to provide for a disabled beneficiary without compromising his or her eligibility to receive ODSP benefits.
The regulations to the Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sched. B provide that if a person has a beneficial interest in a trust that is derived from an inheritance or proceeds of a life insurance policy, provided that it does not exceed $100,000.00, this interest will not be included in calculating his or her assets. On the other hand, a Henson trust is not restricted as to size, as it is set up to be fully discretionary, such that the beneficiary does not have a vested interest in the trust.
A Henson trust would usually be set up such that the beneficiary who is a recipient of ODSP is the subject of the trustee’s absolute discretion to make distributions to him or her. Upon the beneficiary’s death, there will typically be a gift-over to a person or entity other than the disabled beneficiary. As the disabled beneficiary is not entitled to any assets from the trust (given the trustee’s absolute discretion), it is not considered to be an asset of his or hers. The trustee of a Henson trust should still be mindful in making discretionary distributions to the disabled beneficiary, so as not to exceed the maximum annual income receivable by them, and possibly risk disentitling the beneficiary to ODSP benefits.
As discussed in this article, Alberta recently passed An Act to Strengthen Financial Security for Persons with Disabilities (SA 2018, c 12), which provides that a person’s interest in a trust is not to be included in the calculation of that person’s assets for the purpose of AISH, and repeals the section of the regulations which previously allowed for the inclusion of a trust interest in this calculation. As noted in the article, this will now allow for the use of Henson trusts in Alberta, and provide more flexibility in estate planning where a disabled beneficiary is receiving government support.
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I recently came across several articles (one of which can be found here) regarding the elder financial abuse of a senior gentleman in Moncton, New Brunswick. Around 2013, Mr. Goguen had been living in the home that he owned, with tenants residing in part of the property. Upon deciding to sell his home, Mr. Goguen was referred to Ms. Hannah and Mr. Poirier, licensed real estate agents in New Brunswick. After the home had been listed for sale for some time, without success, Ms. Hannah apparently told Mr. Goguen that his home was in such deplorable condition that it would be impossible to sell without making certain repairs (which Ms. Hannah says Mr. Goguen could not afford) and removing the tenants (whom Ms. Hannah has claimed were using drugs and not paying rent).
As a result of the alleged difficulty in selling Mr. Goguen’s house, he, Ms. Hannah, and Mr. Poirier entered into an agreement whereby Ms. Hannah and Mr. Poirier purchased Mr. Goguen’s home. The terms of the arrangement were not favourable to Mr. Goguen, and it appears that Ms. Hannah and Mr. Poirier did not follow through on certain aspects of the agreement.
The Financial and Consumer Services Commission, which regulates real estate agents in New Brunswick, has revoked Ms. Hannah and Mr. Poirier’s real estate licenses. The Commission stated that Ms. Hannah and Mr. Poirier committed financial abuse of a senior and took “outrageous and egregious advantage” of Mr. Goguen. The Public Trustee of New Brunswick has now become involved on Mr. Goguen’s behalf, and has filed a statement of claim against Ms. Hannah and Mr. Poirier, seeking $83,320.00, characterized as the amount owing to Mr. Goguen.
We’ve blogged about elder abuse a number of times. Unfortunately, due to factors such as isolation, physical difficulties, and cognitive impairments, elderly people are often vulnerable to abuse. Given this vulnerability, and the circumstances in which abuse occurs, it can go undetected for a significant amount of time. In such situations, it may be too late to make the elderly person “whole” if the abuse is not discovered until it is too late.
Fortunately in Mr. Goguen’s case, despite the fact that it took a number of years, the Public Trustee discovered the abuse and is now taking steps to protect Mr. Goguen and recoup funds owed to him by his abusers. However, the Public Trustee is seeking the amount of approximately $83,000.00, which may not fully reimburse Mr. Goguen for the value of the house had it been sold to a normal third-party purchaser. Additionally, one of the articles also notes that Mr. Goguen had named Ms. Hannah and Mr. Poirier as his attorneys, and also executed a will naming them as executors and beneficiaries of his estate. It is unclear whether the Public Trustee has sought any relief in this regard. As such, even though the Public Trustee may be pursuing relief on Mr. Goguen’s behalf, it is an unfortunate possibility that he may continue to feel the effects of the abuse.
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The recent decision of Fletcher’s Fields Limited v Estate of Samuel Harrison Ball, 2018 ONSC 2433 considered whether an appointment of trust funds for a particular purpose created an interest in land.
Fletcher’s Fields is a not-for-profit Ontario corporation which owns land that is predominantly used as a sports facility for rugby football union (the “Land”). Mr. Jenkins was the trustee of the estate of Samuel Harrison Ball. He was also a lawyer, and over the years had been actively involved with Fletcher’s Fields, as General Counsel, and as a member of the board of directors. In Jenkins’ role as trustee of Mr. Ball’s estate, he had the power to appoint money forming part of the estate as he saw fit.
In 1994, Jenkins exercised his power to provide Fletcher’s Fields with $100,000.00 pursuant to a “Deed of Appointment”. The Deed of Appointment provided that (a) the money must be used solely for the purpose of improving the sports facility on the Land; (b) the trustee had the right to revoke any or all of the money if the Land was not kept in good condition suitable for playing the sport; and (c) if revoked, Fletcher’s Fields was required to transfer the fund to the trustee, with interest.
In 2015, a new board of directors for Fletcher’s Fields was elected, which did not include Jenkins. It seems that Jenkins may not have been pleased with this development. The following year, Fletcher’s Fields discovered that a notice had been registered on title to the Land by Jenkins, under s. 71 of the Land Titles Act, R.S.O. 1990, c. L.5. It appears that the notice had been registered after Jenkins had ceased to be a member of the board.
Fletcher’s Fields took the position that the funds provided pursuant to the Deed of Appointment were a gift or, alternatively, trust funds. Jenkins took the position that the Deed of Appointment was not a trust, but rather that it was a loan that was to be repaid if certain conditions crystallized. He characterized it as an equitable mortgage.
The Court noted that the terms of the Deed of Appointment were key to determining whether or not an interest in land had been created. There was no indication of an express intent to create an interest in the Land, or provide that failure to repay the funds would result in a charge over the Land. Without such an express intent, the notice should not remain on title to the land. The Court also held that the parties’ conduct supported the position that there was never any intention to create an interest in the Land.
The Court ordered that the notice that had been registered by Jenkins on title to the Land be removed. The result of this case seems correct, as one would expect that an interest in land should not be created unilaterally and without notice. There are significant differences between types of financial arrangements such as loans, mortgages, gifts, and appointments of trust funds. It is reassuring that the Court in this situation upheld the integrity of the parties’ intentions in crafting their financial arrangement and did not impose a charge-type interest in the Land where none existed.
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The Substitute Decisions Act, 1992, S.O. 1992, c. 30 (the “SDA”), governs, among other things, the appointment of guardians for incapable persons. There are two types of guardians: a guardian for property and a guardian for personal care.
Sections 22(1) and 55(1) of the SDA provide that the Court may, on any person’s application, appoint a guardian of property or of the person, for a person who is incapable of managing property or personal care if, as a result of the said incapacity, it is necessary for decisions to be made on his or her behalf.
In order to appoint a guardian for someone, the Court will need to make a finding of incapacity for that person. This is an important hurdle, and the Court will generally need to see evidence that the person in question has been assessed as incapable of managing property and/or personal care prior to making a finding that he or she is incapable.
Depending on the circumstances, a person may submit to a capacity assessment voluntarily. However, according to section 78(1) of the SDA, if a person refuses to be assessed, an assessor shall not perform the assessment. Section 79 of the SDA allows the Court to order that a person be assessed, provided that the Court is satisfied that there are reasonable grounds to believe the person is incapable. Additionally, to obtain a Court Order for an assessment, there must be a proceeding under the SDA, in which the person’s capacity is in issue. The Ontario Court of Appeal in Neill v Pellolio, 2001 ONCA 6452 held that there is no stand-alone relief available for an Order for a capacity assessment in the absence of an application brought under the SDA. Accordingly, obtaining a finding of incapacity from the Court may not be a simple endeavour.
The SDA also has in place measures to protect an individual’s decision-making rights from undue restriction. Sections 22(3) and 55(2) state that the Court shall not appoint a guardian if it is satisfied that the need for decisions to be made will be met by an alternative course of action that does not require the Court to find the person incapable, and is less restrictive of the person’s decision-making rights than the appointment of a guardian.
Accordingly, for example, if a person has already granted a power of attorney, allowing the named attorney to act would constitute a less restrictive course of action which also does not require the Court to make a finding of incapacity in order for decisions to be made for an incapable person. Furthermore, if a person is incapable of managing their property or personal care, but remains capable of granting a power of attorney, that would likely also constitute a less restrictive course of action, and would allow that person to exercise their decision-making rights.
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I recently read this article from the New York Times, which discusses the Will of Harper Lee, author of “To Kill a Mockingbird”, as well as some of the events that occurred several years prior to Harper Lee’s death. Harper Lee died in 2016, at the age of 89. In the years leading up to her death, there was some question as to her capacity, and possible vulnerability to coercion or undue influence.
The New York Times article states that Ms. Lee had had a stroke in 2007 and also had severe vision and hearing problems. Ms. Lee resided in an assisted living facility before her death. The article also describes the position taken by counsel for Ms. Lee as part of a copyright dispute in 2013, where counsel stated that Ms. Lee had been taken advantage of and coerced into signing away her copyright because she was “an elderly woman with physical infirmities that made it difficult for her to read and see.”
A couple of years ago, in 2015, Ms. Lee published her second novel, “Go Set a Watchman”. It turned out that this novel had been an earlier draft of her extremely popular book, “To Kill a Mockingbird”, which is purported to have been discovered by Ms. Lee’s lawyer, Tonja Carter, in 2014. There was some controversy surrounding the publication of “Go Set a Watchman” on the basis that Ms. Lee had not actually consented to the manuscript being published, and may have been manipulated into doing so. The publication of a new book was particularly remarkable given that Ms. Lee had only ever published one book prior to “Go Set a Watchman”—namely, “To Kill a Mockingbird”, which was published in 1960. However, an investigation was performed, and a determination made that there had been no elder abuse of Ms. Lee.
After Ms. Lee’s death, her Will had not been made a matter of public record, as a result of the successful efforts by Ms. Carter (named in the Will as executor) to have the Will sealed on the basis that Ms. Lee, who was a very private person, would have wanted her Will to remain private. It was only unsealed recently after litigation by the New York Times, and after Ms. Lee’s estate withdrew its opposition to the Will being unsealed.
The Will was signed only 8 days before Ms. Lee’s death, and apparently directs that the bulk of her assets be transferred into a trust formed by Ms. Lee in 2011. Ms. Carter is one of the trustees of this trust. Further documents relating to the trust are not public, and accordingly, very few details are known about it.
Given the questions surrounding Ms. Lee’s potential vulnerability in the years leading up to her death, it will be interesting to see whether anything further develops in relation to her estate, or the trust which apparently will hold most of the assets of Ms. Lee’s estate.
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In Ontario, if there is a claim to be made or continued by a deceased person or their estate, any such claim must be brought by the executor or administrator of his or her estate. If there is no executor or administrator, under Rule 9.02 of the Rules of Civil Procedure, RRO 1990, Reg 194, the court may appoint a litigation administrator, who will represent the estate for the purpose of the proceeding. A beneficiary or other person may also represent the interests of an estate, under Rule 10.02, where it appears that an estate has an interest in a matter in question in a proceeding.
In British Columbia, section 151 of the Wills, Estates and Succession Act, SBC 2009, c. 13 (“WESA”) provides an alternative way of pursuing a claim by an estate. Section 151 states that a beneficiary of an estate may, with leave of the court, commence proceedings in the name and on behalf of the personal representative of a deceased person, either to recover property or enforce a right, duty or obligation owed to the deceased person that could be recovered or enforced by the personal representative, or to obtain damages for breach of a right, duty or obligation owed to the deceased person. Section 151(3) outlines the circumstances in which the court may grant leave in this regard:
(3) The court may grant leave under this section if
(a) the court determines the beneficiary or intestate successor seeking leave
(i) has made reasonable efforts to cause the personal representative to commence or defend the proceeding,
(ii) has given notice of the application for leave to
(A) the personal representative,
(B) any other beneficiaries or intestate successors, and
(C) any additional person the court directs that notice is to be given, and
(iii) is acting in good faith, and
(b) it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a beneficiary or an intestate successor for the proceeding to be brought or defended
In a document produced by the Government of British Columbia entitled “The Wills, Estates and Succession Act Explained” (“WESA Explained”), section 151 is described as overcoming a gap in the law. Previously, if a beneficiary wished for an action to be brought on behalf of an estate, and the personal representative refused to do so, the beneficiary’s sole recourse would be to apply for removal of the personal representative.
However, removal may not always be necessary or convenient. As described in WESA Explained, such a situation could arise in the event that the personal representative’s main concern (as is often the case with executors, generally) is to preserve and distribute the estate. The personal representative is therefore likely more risk adverse and conservative in assessing the potential success of pursuing an action. The beneficiary may have differing views on the merits of the claim, and in his or her assessment of the risk and return.
Section 151 of WESA differs from the process for litigation administrators and representation orders in Ontario in that s. 151 allows the executor and beneficiary appointed to bring a claim on behalf of the estate to co-exist simultaneously.
The concept of s. 151 is similar to a derivative action, in which a shareholder or other person is permitted to bring an action on behalf of a corporation, where the corporation refuses to do so.
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When someone composes an obituary for a loved one who has passed away, carefully selecting the photograph to go along with it, one would suppose that the last thing on their mind is the copyright they may hold in that obituary and photograph. Of course, few people expect that an obituary could be the subject of republication or possible copyright infringement.
However, one website has been reproducing obituaries in their “database of deceased people”, leading to questions about ownership of the obituaries themselves, as well as the photographs accompanying them. The website reproduces obituaries and photographs, apparently without permission from the individuals who originally created and posted the obituaries. As reported in this Global News article, one family even states that an obituary for their loved one, which had not been written by their family and contained a number of errors, was posted on the website less than a day after their loved one passed away. The family did not know who wrote the obituary, although the website released a statement that all of the obituaries they re-post are already on the internet.
A recent article in The Lawyer’s Daily discusses an application for certification of a class action copyright claim against this obituary database website. The application claims that the website is infringing copyright and moral rights in respect of the obituaries and photographs. The moral rights claim relates to the website’s monetization of the obituaries by offering options to purchase flowers, gifts, or virtual candles, through affiliate retailers. Some funeral homes offer a similar service, but the article notes that the unsavoury nature of the website’s business model, which consists of “scraping” obituaries from elsewhere on the internet, without permission or notice, and making money by doing so through advertisements or the selling of flowers or virtual candles, could provide some support for the moral rights claim.
In relation to the copyright infringement claims, there may be some obstacles to overcome, particularly in relation to ownership of the copyright. According to The Lawyer’s Daily article, under the Copyright Act, R.S.C., 1985, c. C-42, the person claiming a copyright infringement must be the owner, assignee or exclusive licensee of the work in question. An assignment of copyright must be in writing. As mentioned in the article, this could create an issue if the photograph used in the obituary was taken, for instance, by a stranger.
Damages in the event of liability are also uncertain. In a recent case with similar facts, where the defendants were found to have infringed on the plaintiff’s copyright, the court awarded statutory damages of only $2.00 per image because the cost of capturing the images in that case was low. However, given the emotional aspect of obituaries, it is possible that the facts in this case could lead to a larger damages award.
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A beneficiary of a trust can have either a vested or a contingent interest in the trust’s assets. For example, if a trustee holds an asset in trust for another person, with no further conditions attached, the beneficiary’s interest in that asset will be vested. However, if the trustee holds the same asset in trust for a beneficiary, subject to the condition that the beneficiary attain the age of 30, that beneficiary’s interest depends on them reaching the age of 30, and is therefore contingent. Whether a beneficiary’s interest is vested or contingent can have different consequences depending on the particular circumstances.
In Spencer v Riesberry, 2011 ONSC 3222 (affirmed in Spencer v Riesberry, 2012 ONCA 418), the Ontario Superior Court of Justice considered the nature of a beneficiary’s interest in a trust. Specifically, in the context of matrimonial litigation, the court considered whether a spouse’s beneficial interest in real property held by a trust could be considered as “property in which a person has an interest” for the purpose of s. 18(1) of the Family Law Act, R.S.O. 1990, c. F.3, such that the property in question could be considered the matrimonial home. If a property is considered to be a matrimonial home, pursuant to s. 4 of the Family Law Act, it cannot be deducted or excluded from the calculation of net family property and can contribute to increasing the owner spouse’s net family property.
In this case, a married couple, Sandra and Derek, had been residing, with their children, in their family home on Riverside Drive. In 1993, Sandra’s mother, Linda, had purchased the Riverside Drive property and settled it in a trust (the “Trust”). Sandra and Derek resided in the residence prior to their marriage in 1994, as well as during the marriage. The couple separated in 2010.
The beneficiaries of the Trust were Sandra, Linda, and Linda’s three other children. Three other properties were added, by gift, to the Trust over subsequent years, and each of these other properties were occupied by one of the other three children and their families.
The terms of the Trust provided that the trustee was to hold the trust property, subject to a life interest in favour of Linda. Upon Linda’s death, the trustee was to divide the trust property into equal parts so that there is one part for each beneficiary living at the date of Linda’s death.
The court considered the nature of Sandra’s interest in the Riverside Drive property in the context of her net family property and whether it could be characterized as a matrimonial home. Due to the terms of the Trust, the court held that Sandra did not have a specific interest in the Riverside Drive property. Although she was a beneficiary of the Trust, which owned the Riverside Drive property, it does not follow that Sandra was specifically entitled to that property in particular. Sandra’s interest in the Trust was characterized as a contingent beneficial interest, as her ultimate entitlement under the Trust depended on various factors. For instance, as the division of Trust property amongst beneficiaries would happen only upon Linda’s death, the assets to be distributed would consist of whatever is held by the Trust at that time. Additionally, the beneficiaries must be alive at the time of Linda’s death in order to receive their share.
On this basis, the Court concluded that Sandra did not have a specific interest in the Riverside Drive property such that it could be considered a matrimonial home. As Sandra was a contingent beneficiary of the Trust, the Court did find that she held an interest in the Trust’s assets generally, which was required to be valued and included as part of the equalization calculations. However, as the interest is not subject to the special treatment given to the matrimonial home, it can be deducted or excluded from net family property, as applicable. Overall, as Sandra’s interest in the Trust’s assets was contingent and not vested, it had a significant effect on the matrimonial proceedings with her spouse.
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In the spirit of the holidays, today I thought I would write about a recent decision related to gifting. In Grosseth Estate v Grosseth, 2017 BCSC 2055, the British Columbia Supreme Court considered whether the presumptions of resulting trust and undue influence were applicable to various inter vivos gifts made by a deceased uncle to one of his nephews. Ultimately, the court concluded that both presumptions were rebutted, and the gifts were valid.
In Grosseth Estate, the deceased, Mort, left a Will providing that the residue of his estate was to be distributed equally amongst his 11 nieces and nephews. However, most of his estate had been gifted to one particular nephew, Brian, and his wife, Helen, prior to Mort’s death. This left only about $60,000.00 to be distributed in accordance with Mort’s Will. One of Mort’s other nephews, Myles, who was the executor of Mort’s estate, brought a claim against Brian and Helen following Mort’s death, seeking to have the money that had been gifted to them by Mort, returned to the estate.
About 10 years prior to Mort’s death, he moved from Alberta, where he had lived most of his life, to British Columbia, where he moved into Brian and Helen’s basement suite. Mort became a full participant in the family; he was included on family outings, attended family dinners every night, and became like a grandfather to Brian and Helen’s children.
For the first couple of years after Mort moved in, he gave Brian and Helen money each month, on an informal basis, as contribution to household costs. Around 2 years after Mort had been living with them, Brian and Helen had decided to purchase a commercial property for Helen’s chiropractic practice. Mort insisted on gifting $100,000.00 towards the purchase price, making it clear that he did not want anything in return. Following this payment, Mort did not make further contributions to the monthly household expenses. The court concluded that there was a tacit agreement amongst Mort, Brian, and Helen that Mort’s generous gift had cancelled any notion that further payments would be required. Several years later, Mort also gifted $57,000.00 to Brian and Helen to pay off the balance of their mortgage.
The court found that the nature of the relationship between Mort, Brian, and Helen gave rise to the presumption of resulting trust as well as the presumption of undue influence. However, both of these presumptions are rebuttable.
The court acknowledged that, with respect to undue influence, Mort did depend on Brian and Helen, but based on the evidence of a number of individuals, concluded that he remained independent and capable throughout. Accordingly, the presumption of undue influence was rebutted.
The presumption of resulting trust was also rebutted as the court was satisfied that Mort intended the transfers to be gifts motivated by “a natural and understandable gratitude to Brian and Helen for the happiness and comfort of his final years.”
It is not uncommon for this type of situation to come up. Where a deceased lived with one niece or nephew (or sibling), or where the niece/nephew/sibling is the primary caregiver prior to the deceased’s death, any gifting that was done in the context of this relationship may be vulnerable to challenge on the basis of resulting trust or undue influence. Unfortunately, in some instances, the relationship dynamics involved in these kinds of arrangements can result in suspect gifts or transfers. Transfers made without clear evidence of an intention to gift can also raise questions. In this case, the court did not find that there was any improper behaviour on the part of the giftees, did find evidence of an intention to gift, and the transfers were ultimately upheld.
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