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Legal Presumption Determines Outcome of BC Estate Dispute Among Siblings

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  • Legal Presumption Determines Outcome of BC Estate Dispute Among Siblings

A recent BC estate dispute between a brother and sister over their father’s estate demonstrates the importance of proving intention when it comes to gifts of property made to a child during a parent’s lifetime. In Pavlovich v. Danilovic, 2020 BCCA 239 the brother said that his father intended to give him two properties as a gift, to the exclusion of his sister. The sister said the properties had been transferred to her brother as joint tenant with their father simply as a financial strategy to avoid taxes. The brother was unable to prove his father’s intention for transferring title to the properties—but neither was the sister. In today’s post, we will examine the legal presumption that allowed the sister’s claim to prevail despite the Court not preferring either siblings’ version of events.

Facts giving rise to BC estate dispute

Dragomir Danilovic and his wife made wills in which each provided that the other spouse would inherit their respective estates, and that the estate of the survivor would be divided equally between their two children, Ljuba and Alexander. The son, Alexander, was named executor under each will. Dragomir and his wife owned two properties as joint tenants: a home in Vancouver (the “Whyte House”) and a vacation property in Harrison, BC (the “Harrison House”). When Dragomir’s wife died in 1984, title to both properties passed to Dragomir by right of survivorship, not through his wife’s estate. In 1988, Dragomir transferred title to the Whyte House into joint tenancy with his son Alexander for $1.00. In 2011, title to the Harrison House was transferred into joint tenancy with Alexander for consideration of $1.00 and “natural love and affection.” Less than two weeks later, Dragomir died. The properties passed to Alexander by virtue of the right of survivorship. After Dragomir’s death, Ljuba sought a declaration that the properties were held in trust by Alexander for her benefit.

Gratuitous property transfers from parent to adult child

Alexander maintained that his father intended to give him both properties as a gift, to the exclusion of his sister. He was placed on title to both of his father’s properties for nominal consideration. Where property is gratuitously transferred from a parent to an adult child, the presumption of resulting trust arises. A resulting trust means title to property is in one person’s name, but that person, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner. In the Pavlovich dispute, the effect of the presumption—if not rebutted— was that the properties would form part of the father’s estate and be shared equally by the siblings pursuant to the father’s will.

Son unable to prove father intended to gift the properties to him

At trial, both siblings presented oral and documentary evidence in support of their version of events, but neither sibling was able to persuade the Court of their father’s intention. Proof of the deceased’s intentions stood in “equipoise” in the sense that the Court could not prefer either sibling’s evidence over the other. Despite not being able to satisfy the Court of her father’s intention, Ljuba’s claim succeeded. This is because the onus of establishing that a gift was intended is on the adult child to whom the property was transferred—in this case, Alexander. It was for Alexander to rebut the presumption of resulting trust, and he failed to do so. The trial judge declared that Alexander held the properties on resulting trust for the estate of his father. The Court of Appeal agreed and dismissed Alexander’s appeal.

Bottom line on the presumption of resulting trust in BC estate disputes

The law presumes that a parent who gratuitously transfers property to an adult child intends to convey legal title to the property but retain the beneficial interest. Of course, there are situations where a transfer between a parent and an adult child is intended to be a gift. The governing consideration is the parent’s actual intention, which must be established by the child claiming that the property transfer was meant as a gift. Courts need only resort to the presumption of resulting trust to resolve a dispute where there is insufficient evidence of the transferor’s intent or the evidence is unpersuasive. The BC estate dispute in Pavlovich v. Danilovic was one of the rare cases where the outcome was decided on the presumption of resulting trust.

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