Gifts Before Death Challenged by the Estate in Ontario

It is common for families to discover, after a death, that a parent gave away a house, moved savings into a child's name or added someone to a bank account in the final years. Other heirs often ask whether the estate can get that property back.

Ontario law does not treat every pre-death transfer as valid just because the parent signed it. The answer turns on the relationship, the parent's intention and the evidence. This article explains the main legal ideas in plain terms.

Two different ways a transfer can be undone

Challenges to lifetime transfers usually follow one of two paths. The first is undue influence, where the argument is that the gift did not truly reflect the giver's free choice. The second is the resulting trust presumption, where the law starts from the position that a parent did not intend to make a gift to an adult child unless the child can show otherwise.

Undue influence and gifts

For gifts and transfers, as opposed to wills, a presumption of undue influence arises where the relationship between giver and recipient carries potential for domination. Once it arises, the recipient must show the gift resulted from the giver's full, free and informed thought.

Independent advice for the giver helps but is not required in every case, and corroborating evidence is needed to rebut the presumption. By contrast, when undue influence is alleged against a will, the burden is on the party attacking the will. The difference in who carries the burden is one reason it matters whether the document is a gift or a will.

Transfers to adult children and joint accounts

A gratuitous transfer from a parent to an adult child is presumed to be held on resulting trust for the parent. The child bears the burden of rebutting that presumption, on a balance of probabilities, by showing the parent's actual intention at the time of the transfer. Evidence of the parent's later conduct may be considered if it is relevant.

The Court of Appeal has applied the resulting-trust presumption to bank accounts placed in joint names with adult children. The court weighs all the evidence of intention, including the terms of any power of attorney granted to the person who received the transfer. An estate trustee has a duty to call in the estate's assets.

• Evidence that the parent meant the child to have the money outright, or only to help manage it, is central.
• Bank records, notes, lawyer or advisor files and what the parent said to others can all bear on intention.
• Each case turns on its own evidence, so similar-looking transfers can have different results.

Timing, protecting property and cost

The basic limitation period is two years from the day a claim was discovered. A person is presumed to have known of a claim against an estate trustee on the day the act or omission took place, unless the contrary is proved. When the clock started for a transfer in your family is a factual question worth raising with a lawyer quickly.

If you worry that property will be distributed or sold while a dispute is pending, courts can order interim preservation. The court considers whether the assets are the subject of the dispute, whether there is a serious issue to be tried, and the balance of convenience, and it may impose conditions. Where a party's right to a specific fund is in question, the court may order it paid into court or otherwise secured on just terms.

These requests can fail if the evidence is thin. In one case a daughter's application for an interim preservation order to stop distribution of her mother's estate failed at the threshold, and she was ordered to pay $8,758.19 in costs of the application and $15,000 in partial indemnity costs of the appeal. Those figures are examples from one case, not a guide to your costs.

Estate litigation is governed by the ordinary civil costs regime, and costs come out of the estate only where public policy considerations apply. Courts may make blended orders in which the loser pays part of the other side's costs and the estate bears the balance.

What to do next

• List every transfer you know about: what, when, to whom and how much.
• Collect bank statements, land records, account-opening forms and any power of attorney that existed at the time.
• Note who helped the parent with banking or legal paperwork, and whether the parent had independent advice.
• Record when and how you first learned of each transfer, since the two-year period runs from discovery.
• Speak with the estate trustee and then a lawyer about whether to recover the asset for the estate or protect it while the issue is resolved.

Frequently asked questions