Resulting Trust for the Purpose of Creditors but Not Family Members?

Trust can protect jointly owned property from creditors of a deceased parent, but courts generally do not extend this protection to living children. In British Columbia, if a parent adds a grown child as a co-owner for convenience, law normally presumes that ownership of the child’s share is actually held in trust rather than outright gift to the estate. This difference between what appears on title and who actually owns the property is where most conflicts about joint tenancies usually arise.

Resulting trusts, constructive trusts, and unjust enrichment are a defined part of Onyx Law Group’s estate litigation practice in Vancouver. In Sangha v. Sangha, a $400,000 unjust enrichment judgment was recovered for the estate. Candace Cho, KC, restricts her practice to estate and trust litigation and chairs the Trial Lawyers Association of BC estate committee. Whether money you put into a property created a trust is not a question to settle by guesswork, so contact us for a free 30-minute consultation.

This post explains how trusts work for children in British Columbia when parents add them to a property title and why those protections from creditors don’t always stand if there’s conflict among family members.

What Is the Presumption of Resulting Trust?

The presumption of resulting trust is a rebuttable presumption and important in trust law. Generally speaking, if someone transfers some property to another person and there is no explicit compensation or value exchange, we assume that the transferor’s intention was to establish a trust. This reflects an old maxim related to equity which says equity presumes agreements rather than just giving things away.

Essentially, what happens is that courts usually assume that someone who transfers something has intended to create a trust and not just give things away directly. That assumption holds no matter if the recipient is an adult child or a minor.

Suppose A transfers property into joint names with B, and there is no exchange of value. Then B’s interest is presumed to be on behalf of A rather than freely given. This presumption can be rebutted by B showing clear evidence that this transfer was given voluntarily and honestly as a gift.

The person who receives something gets presumed to be holding it as a trustee for the benefit of the former owner. In such cases, the recipient has the burden of proof that this is not really a good faith gift but rather a trust. This presumption is especially significant when there are questions about ownership or when settling down assets related to someone’s estate.

Statistics Canada found that adults born in the 1990s whose parents owned property were twice as likely to own a home in 2021 as those whose parents did not own property. Among those whose parents owned multiple properties, the likelihood was nearly three times as high.

Understanding the intricacies of the presumption of resulting trust is vital, especially for married spouses navigating the Family Law Act or others dealing with property transactions, as it provides a lens through which courts in jurisdictions like BC discern the true intentions of parties involved in property transfers.

Case Study: Mother and Son Registered on Title as Joint Tenants

A striking illustration of this is Petrick (Trustee) v. Petrick, 2019 BCSC 1319, a recent decision of the BC Supreme Court where the nature of the property arrangement between a mother and her son was scrutinized. Despite the mother’s contention that the property was held under a resulting trust for her son, thereby insulating it from her son’s creditors, the trial judge ruled otherwise.

This opens up for discussion about resulting trusts and the impacts these trusts have on family law as well. We also ask if trusts really do own property. In BC, we look at joint ownership. Resulting trusts and declarations of trusts are not just legal terms but are central matters that affect legal estates and who owns what and transfers of assets.

The property in question in Petrick was a residential strata condominium in New Westminster. In 2006, Ms. Chilton and her adult son, Mr. Petrick, purchased the property for $314,900. At the time of purchase, Ms. Chilton and Mr. Petrick were registered on title as joint tenants in joint names. Ms. Chilton provided the purchase money for the deposit and down payment, using the proceeds of the sale of her prior home in Williams Lake.

For this property, they took out a mortgage worth $140,000 to cover the remaining balance. Ms. Chilton and Mr. Petrick both signed as borrowers for that mortgage. Later years saw evidence that Mr. Petrick did make some mortgage payments, but most of the contributions towards mortgage payments and other expenses related to the property came from Ms. Chilton. Ms. Chilton occupied the house right from when she purchased it; she was the only person who lived there. On the other hand, Mr. Petrick never lived there at all.

Why Did Mr. Petrick Transfer His Interest Back to His Mother?

In 2013, Mr. Petrick faced some serious financial problems, and Ms. Chilton learned about them. Ms. Chilton asked Mr. Petrick to give her notice of his registered interest in the property. In mid-July of 2014, during foreclosure proceedings initiated by his creditors, Mr. Petrick made a voluntary transfer of his interest in the property to Ms. Chilton (that was called the “2014 Transfer”).

Mr. Petrick later went through a bankruptcy. The trustee in bankruptcy brought an application asking the court to determine whether the 2014 transfer of the interest in title to real property from Mr. Petrick to his mother was void pursuant to the Fraudulent Conveyance Act, R.S.B.C. 1996, c. 163. In other words, it was alleged that the transfer was done with the intent of putting the property out of reach of Mr. Petrick’s creditors.

What Is a Resulting Trust, and Did It Apply Here?

A resulting trust happens when property is in one person’s name, but they don’t actually own it. This can happen if they’re a fiduciary or if they didn’t pay anything for the property. In these cases, the law says they have to return it back to the original owner. If someone holds property this way, they’re not the real owner. They’re just a title holder for someone else, like a trustee. That means they can’t keep it for themselves, and their creditors can’t touch it either.

Ms. Chilton argued that the property transfer in 2006 was a gift because no money changed hands. She said Mr. Petrick holds legal title to the property, but he is holding it in trust for Ms. Chilton; he doesn’t own it outright.

Did the Court Find a Resulting Trust in This Case?

To weigh this argument, Madam Justice Francis first had to work through how the law of joint tenancy applies to arrangements between parents and their adult children. Joint tenancy itself rests on four unities: unity of title, interest, time, and possession.

One key difference that really defines joint tenancy is survivorship rights. While they live together, each person owns an equal share of something. When someone dies though, the surviving person gets to own everything outright automatically.

Registering property jointly doesn’t automatically mean a true joint tenancy exists. Courts rely on a set of legal presumptions to figure out who actually holds the beneficial interest, and those presumptions matter most when a transfer happens without payment.

When a parent makes a gratuitous transfer of property to an adult child, the presumption that a resulting trust arises is triggered, meaning the law assumes the person holds their share in trust for the parent’s estate rather than as an outright gift. We’ve written before about how this presumption plays out in estate litigation.

But that presumption is not always decisive. If there is clear evidence showing the actual intention of the transferor (that intention at the time of the transfer), courts don’t have to rely on any presumption at all. When intent can be proven, that proves stronger than default legal presumptions.

Why Didn’t the Resulting Trust Presumption Apply?

The claim that Ms. Chilton held title as donee beneficiary of a resulting trust failed because the judge ruled that Mr. Petrick was not given free and clear title; he was actually a co-borrower for the mortgage.

Pledging credit put Mr. Petrick at risk. He remained jointly and severally responsible for the mortgage debt. Since Mr. Petrick exchanged something of value for his interest in the house, he didn’t make a gift, and therefore no presumption that there was a resulting trust applied.

What Did Ms. Chilton Actually Intend When She Added Her Son to Title?

Even if Mr. Petrick hadn’t provided value to the property he had an interest in, there is no evidence to support that Ms. Chilton intended that her son receive the property as part of a resulting trust for her estate. Intent behind the transaction was unmistakable. She registered the title jointly with Mr. Petrick for estate planning reasons and wanted him to benefit from survivorship rights when she passed away.

If Mr. Petrick holds title in result of a resulting trust for Ms. Chilton’s estate, that property would pass to her upon her death and would have to go through probate proceedings; this is exactly what she wanted to avoid because she put her son on title as joint tenants.

Since Mr. Petrick had both a legal and beneficial interest, was the 2014 transfer fraudulent? Check back for our Vancouver estate lawyers’ discussion of the result and the risks of using joint tenancy for estate planning purposes.

Our Methodology

We wrote this piece by starting with looking at cases and laws. We then translated that reasoning into something that is useful and practical for people who find themselves in this circumstance. Here is the step-by-step process we followed.

Step 1: Identify the Governing Legal Question

We started by considering the main legal issue at hand: whether trusts that result automatically do an effective job of safeguarding joint assets of an individual from creditors of that person’s children. We also considered whether such trusts would reduce conflicts among family members too. Focusing this way enabled us to investigate specifically into this particular doctrine instead of just looking at the general rule of trusts.

Step 2: Review the Primary Case Law

We got the full decision in the case of Petrick (Trustee) vs. Petrick (2019 BCSC 1319) directly from the database of BC courts rather than relying on secondary summaries. Carefully reading the judge’s reasons allowed us to closely follow how evidence was considered and how the court reached its conclusions about trust issues.

Step 3: Trace the Underlying Legal Principles

We worked out the core doctrines that the court relied upon such as unity of title, unity of interest, unity of possession and unity of time for joint tenancy along with presumptions of resulting trusts and the equitable maxim that equity presumes bargains rather than gift. Understanding these key concepts first let us explain how the court came to its reasoning rather than simply stating the result.

Step 4: Examine How the Presumption Applied to the Facts

We scrutinized specifically what the court relied upon: Mr. Petrick being a co borrower on the mortgage, his financial contribution, and Ms. Chilton having clear intentions that we could counter. By doing this step, we connected an abstract legal test to a concrete example of a factual scenario that readers could relate to much better.

Step 5: Cross-Reference Related BC and Canadian Authority

We reviewed reasoning for Petrick alongside other relevant decisions such as Pecore v. Pecore to be sure that courts consistently apply a presumption of resulting trust. This reassured us that the principles discussed in this piece really do follow established law rather than just one particular decision.

Step 6: Translate the Legal Analysis Into Plain Language

After completing our legal research, we then reworked our analysis into simple language that anyone without any legal training could understand. Our aim was to keep the content accurate but also make practical implications like the risks associated with putting a child’s name on the deed easy to see and act upon.

Step 7: Verify Against Firm Experience and Practice Area Expertise

This article is based on actual experience from Onyx Law Group’s estate handling team and examples like Sangha versus Sangha. We wanted to make sure that what we offer goes beyond just theory and really demonstrates what disputes look like in practice.

Joint Tenancy vs. Other Estate Planning Tools

Adding a child to the title isn’t the only way to plan for the future. Here’s how it stacks up against the alternatives and what you give up or gain with each one.

There is generally a similar trade off: with less documentation, there is more room for disputes among courts, creditors, or siblings over what exactly was meant. Petrick illustrates how far this lack of clarity can extend even if the transfer took place long ago and the parent is still around to clarify things.

If you want to avoid probate and protect assets from your children’s creditors, you may find that holding things as undocumented joint tenants is very risky. It might be cheaper in the long term to talk with an estate lawyer and discuss using something like a gift declaration or trust before you actually transfer anything.

Need Help Planning Your Estate in BC?

In British Columbia, adding an adult child as a co-owner of real estate is a typical way to plan estates and usually to avoid probate fees or to protect the property from creditors. But there is a tricky legal aspect involved, which is called a presumptive resulting trust.

If parents transfer property directly to children without compensation being given, generally the law presumes that children hold the property in trust for the benefit of the estate of the parents rather than as outright gifts. This presumption helps protect against creditors, but it can also cause serious family conflicts later when relatives argue over what the parents really wanted to do.

That’s why it’s important to document clearly what parents want while they are still around. If disputes go to court and there are verbal promises or assumptions about what someone wanted, that isn’t enough. Talking to an estate lawyer if you’re thinking about sharing ownership of something in your inheritance or if you already have a conflict about shared property would be helpful.

Did the money you put into that property actually create a trust, or did you just hand over a gift you can never get back? That’s exactly the kind of question Onyx Law Group’s estate litigation practice in Vancouver is built to answer, and the results back it up, including a $400,000 unjust enrichment judgment recovered in Sangha v. Sangha. Candace Cho, KC, leads that work, restricting her practice entirely to estate and trust litigation and chairing the Trial Lawyers Association of BC’s estate committee. Guessing isn’t a strategy here, so contact us for a free 30-minute consultation and find out where you actually stand.

Frequently Asked Questions

Adding your child’s name to a property title seems pretty easy, but Canadian law doesn’t always regard it as a simple gift. People often ask us some questions about this move first.

What Is a Presumption of Resulting Trust?

If a parent transfers property to an adult child jointly and does not transfer that property at fair market price, then according to the law, the presumption is that the child holds title on behalf of the parent and not as a direct gift from them. Therefore, this means the child has to show proof that the parent really meant to give them the property outright.

Does Joint Tenancy Protect Property From a Child’s Creditors?

It’s not reliable. Trusts can protect property for children and shield it from creditors but only if certain presumptions hold true and are not refuted. If that happens, a court might say that whatever belongs to the child actually belongs to the parent’s estate. So creditors that try to go after children usually can’t claim that they have any real stake at all.

Can Family Members Challenge a Joint Tenancy After a Parent Dies?

Yes, siblings or others left out can contest this transfer in court and argue that their parent did not intend to give them something, and thus presumption that there was a trust does not hold. Disputes usually hinge on what the parent actually intended when transferring things.

How Do You Rebut the Presumption of Resulting Trust?

The child needs strong evidence that the parent truly intended to give something valuable; this might include a signed document, testimony from witnesses, or a statement the parent made at the time of transferring something. Courts have looked at contemporaneous evidence rather than just relying on recollections years after an event, as happened in the case of Pecore v. Pecore, where it went through Ontario courts and then through appeals to the Court of Appeal before reaching final decision by the Supreme Court of Canada.

Should I Consult a Lawyer Before Adding My Child to My Property Title?

Sure, a lawyer can write down what you really want when you’re transferring things; this kind of written evidence stops disputes later on from happening. Skipping this step is one of the most frequent reasons why family members wind up in court when someone’s passed away.

Disclaimer: The information on this page is general legal information about British Columbia law, not legal advice for any specific situation. Reading this page does not create a solicitor-client relationship. BC law changes, and the procedure that applies to a specific situation depends on facts not covered here. For advice on your situation, consult a qualified British Columbia estate lawyer directly. Past results, illustrative scenarios, and reference to typical fact patterns do not guarantee similar outcomes in any specific case.