When a parent transfers assets to an adult child, the rebuttable presumption of resulting trust will apply to that transfer. Unless the child can rebut the presumption, it will be presumed that the child was holding the transferred assets in trust for the parent.
But what kind of evidence will be needed to rebut the presumption? Ideally there would be some kind of documentation made contemporaneously with the transfer to support the parent’s intention. If the documentation is lacking, there may be evidentiary issues where the parent has passed away or is incapable, and is not able to give evidence as to his or her intention at the time of the transfer.
In the recent decision of Pandke Estate v Lauzon, 2021 ONSC 123, the court considered two cheques paid by a mother, Carol, to her adult son and daughter-in-law, Steven and Marnee, in the amounts of $35,000.00 and $90,000.00, respectively, shortly before her death. The court reviewed the evidence in determining whether the presumption of resulting trust was rebutted, or whether Carol had intended the cheques to be gifts.
Carol was diagnosed with terminal pancreatic cancer in 2017, and died about a month following her diagnosis. At the time that she was diagnosed, she lived with her husband, William, to whom she had been married since 1992. Following her diagnosis, it was decided that Carol would move in with Steven and Marnee, as William was not physically capable of providing her the care that she would require. Shortly after moving in with Steven and Marnee, Carol provided a cheque in the amount of $35,000.00, payable to Marnee, with a note on the cheque stating that it was “For Rent”. Four days later Carol provided another cheque payable to Steven, in the amount of $90,000.00, with the note on the cheque stating “Medical Expenses”. The total value of the two cheques constituted the majority of Carol’s liquid assets. William, who was the sole beneficiary of Carol’s estate, challenged these payments following Carol’s death.
The court found that the $35,000.00 payment was intended to be a gift by Carol to Steven and Marnee. Part of the evidence on which the court’s conclusion in this regard was based was Marnee’s hearsay evidence of what Carol had told her about why she was making the payment, being that Steven had left his job to care for Carol and she did not want him to suffer financially as a result. The court found that Marnee’s hearsay evidence could be admitted, notwithstanding that it was hearsay, on the basis that it fell within a traditional exception to the hearsay rule (that the statement is adduced to demonstrate the intentions or state of mind of the declarant at the time the statement was made) and under the principled approach to hearsay evidence as it met the necessity and reliability requirements. The court also found that Marnee’s evidence was corroborated by independent evidence.
However, with respect to the $90,000.00 payment, the court found that there was insufficient evidence to rebut the presumption of resulting trust. Although the court admitted Steven’s evidence of statements made by Carol to him as to her state of mind at the time the cheque was signed, the court also raised other concerns with Steven’s evidence. For instance, the reference to “Medical Expenses” noted on the cheque was concerning, as there were no medical expenses, and the court wondered why Carol would not have simply indicated that it was a gift if that is what she intended it to be. The court was also not convinced by a statement that Steven said was made by Carol that she was making the payment because she did not want Steven to suffer financially because he had left work to care for her, given that only a few days before Carol had made the $35,000.00 payment, which paid off Steven’s truck loan, line of credit, and left around $15,000.00 cash to spare. There was also no corroborating evidence of Carol’s intention to gift the $90,000.00 amount to Steven. As a result, Steven held the $90,000.00 in trust for Carol’s estate.
Unfortunately, it is often the case that payments to adult children are challenged after the parent has died. Unless the parent has taken special care to document his or her intention in making the payment, the intention can be difficult to determine with any degree of certainty. Accordingly, a parent making a gift to an adult child should consider seeking legal advice as to the best way to document such a transfer in order to ensure that their intentions will be upheld. From the opposite perspective, if a parent wants to make a transfer on the basis that their adult child will hold the asset in trust for him or her, or his or her estate, the parent should also consider seeking legal advice to ensure that this is properly documented in order to reduce the chance of issues arising in this regard after his or her death.
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Written reasons from a mid-trial motion was recently released in Barker v. Barker, 2019 ONSC 2906. The only issue in this motion was whether a particular video of a deceased plaintiff was admissible at trial. The larger claim at issue surrounds the Oak Ridge division of the Penetanguishene mental health centre and its treatment of maximum security mental health patients between the 60’s and the 80’s. One of the plaintiffs, James Motherall, died after the action was brought and his claims were continued by the estate trustees of Mr. Motherall’s estate under Rule 9 of the Rules of Civil Procedure.
Prior to Mr. Motherall’s death, Mr. Motherall was examined for discovery in the ordinary course but he was not examined under Rule 36 for the purpose of having his video testimony tendered as evidence at trial. Since a de bene esse examination did not occur, the trial judge was literally unable to assess Mr. Motherall’s credibility with his own eyes. In an effort to address this issue, counsel for the plaintiffs sought to introduce video footage of Mr. Motherall from a CBC documentary that featured Mr. Motherall and his experiences at Oak Ridge. The footage was taken a month before Mr. Motherall’s death and counsel for the Plaintiffs proposed to call the filmmaker as a witness to introduce the unedited footage of the filmmaker’s interview with Mr. Motherall.
Without criticizing the filmmaker’s work, the trial judge found that the video interview was not conducted under reliable circumstances for the purposes of a trial because Mr. Motherall was not sworn, he was not cross-examined, and he was simply asked to tell his story without more. The video was presumptively hearsay and it was up to the plaintiffs to meet, on a balance of probabilities, the criteria of necessity and reliability under the principled approach for the admissibility of hearsay evidence (R v. Khelawon, 2006 SCC 57, R. v. Chretien, 2014 ONCA 403).
In addition to the issues of reliability, the trial judge also found that the video was not necessary since there was a transcript of evidence from Mr. Motherall’s examination for discovery and an affidavit from Mr. Motherall in the course of a prior summary judgment motion.
Both the filmmaker’s proposed testimony and the video footage of Mr. Motherall was found to be inadmissible.
Even though Barker v. Barker is at its core a civil matter, the reasoning from this motion is instructive for estate litigators who are also bound by the additional hurdle for material corroboration pursuant to section 13 of the Evidence Act.
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Today, in episode #355 of Hull on Estates, Paul Trudelle and Holly LeValliant discuss the common law of hearsay and section 13 of the Evidence Act in the context of estate litigation in the Court of Appeal decision in Brisco Estate v. Canadian Premiere Life Insurance.
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In Modonese v. Delac Estate, 2011 BCSC 82 (CanLII) the deceased left her property to her two children equally in her Will but the bulk of her estate consisted of her house, which was transferred into joint tenancy with her son. The son and his wife and children had always lived with the mother in her home except for a 3-year period after an episode of violence by the son against the deceased. At the end of the day, the son was not a credible witness and the Court accepted evidence that the deceased intended her estate to be shared equally between her son and her daughter.
Mondonese v. Delac Estate contains some useful discussion (below) regarding the “principled approach” to admissibility of hearsay evidence and the factors to be considered in determining whether there was undue influence.
To be admissible, hearsay evidence must be:
a) Necessary – the only available means of putting that evidence before the Court; and
b) Reliable – there is no real concern about the truth of the statement because of the circumstances in which it was made and it can be sufficiently tested by means other than cross examination.
The two instances where the question of undue influence arises are:
a) Where the gift was the result of influence expressly used by the donee for the purpose; and
b) Where the relations between the donor and donee around the time of the gift were such as to raise a presumption that the donee had influence over the donor.
To rebut the presumption of undue influence, the defendant must show that the donor gave the gift as a result of her own "full, free and informed thought" in that:
a) No actual influence was used or there was no opportunity to influence the donor;
b) The donor had independent legal advice or the opportunity to obtain it;
c) The donor had the ability to resist any such influence; and
d) The donor knew and appreciated what she was doing.
Other relevant factors include undue delay in prosecuting the claim, acquiescence or confirmation by the deceased, and the magnitude of the benefit or disadvantage.
Sharon Davis – Click here for more information on Sharon Davis.