When is a gift not a gift? When you can’t prove it’s what the giver intended.
Disputed gifts delivered during the lifetime of the deceased are among the most common reasons for the litigation on Ontario’s clogged estates list and proving a gift is a trickier task than it sounds, as one eastern Ontario woman recently discovered when her sister challenged the $400k she received from their stepfather.
The deceased stepfather at the heart of the case lived in a long-term care facility towards the end of his life and had appointed one of his stepdaughters as his power of attorney for property.
After his investment advisor suggested he speak to a lawyer about a potential gift to the stepdaughter acting as POA, the man sent her a letter indicating that he “may also leave” her a gift of cash while he was alive “as a thank you for everything you have done for me.”
The man died weeks later before any money was actually sent, but his stepdaughter later arranged a transfer of $400k from his assets into her own personal investment account. That prompted an objection from her sister, who said the money should be returned to the estate, where they were both beneficiaries.
In the ruling, the judge laid out the three-part test for a valid lifetime gift, which requires: a specific intention to make a gift by the donor; delivery of the gift; and acceptance by the donee.
The stepdaughter’s case failed at the first hurdle, the judge wrote, since there was no clear evidence of the deceased’s actual intention surrounding the gift “and further, no clear evidence as to the amount of any gift.”
The gift letter was no help to her case, the decision continued, since it was couched with contingent language suggesting that a gift was only a possibility, rather than a certainty.
“She has also admitted during cross-examination that she did not truly know what [her stepfather’s] intention was,” the judge added, ordering that the $400k be returned to the estate.
It’s not just end-of-life gifts that can descend into messy estate litigation. It’s increasingly common for parents to help out their adult children with a downpayment in overheated real estate markets like the Greater Toronto Area, advancing cash as a low-interest loan, no-strings gift or as an advance on the child’s inheritance.
For parents with multiple children, gifts don’t have to be that large to raise the hackles of other beneficiaries, especially if one sibling feels their brother or sister is getting more than their fair share.
Whatever their individual situation, parents can reduce the chances of a future estate dispute by documenting the transaction and their intentions in writing.
A major gift or loan transaction may also be a good time to update your will – an experienced lawyer can ensure your intentions are accurately expressed and reflected in the document.
Disclaimer: The content on this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. Users of this website are advised to seek specific legal advice by contacting members of Laredo Law (or their own legal counsel) regarding any specific legal issues.
