Your mother passes away and steps of settling the estate begin. You assumed that on her death you and your siblings would each get an equal share of her property. In the process of settling the estate, you discover that while she was alive your mother gratuitously transferred ownership of her home to only some of your siblings. As such, the home is not part of her estate and you don’t get a share. You suspect that your mother may have been pressured into making the gift, but you aren’t sure. Can you challenge the gift so that the home is considered part of your mother’s estate (and then shared according to the terms of her will)?
When settling an estate, you may discover that your parents already gave property away during their lifetime. In fact, it may be the case that a parent has made the gift of property to some adult children but not others. The Supreme Court of British Columbia recently considered that scenario in Hegel Estate v. Logan, 2014 BCSC 1026.
Take home points
When a gift of property made during a person’s lifetime is challenged after that person has died, the court will examine the circumstances to determine:
- Whether the person was pressured or subjected to “undue influence” in making the gift. If there is sufficient evidence of undue influence, the gift will not be upheld.
- The deceased’s intention with respect to the property when the transfer of property took place. The person who received the property has to prove that the deceased meant to give the property as a gift.
The facts
In that case, Mrs. Hegel’s original plan was to leave her family home in her will, to be divided equally among her eight adult children. However, before undergoing major surgery in 2011, Mrs. Hegel changed her mind and decided to give the property to only three of the eight children; she felt that those three were in the most financial need. The transfer of the property was done during Mrs. Hegel’s lifetime and it was gratuitous, meaning no money changed hands.
After Mrs. Hegel died in 2012, Ronald, the executor of the estate and one of the five children left out of a share in the property, brought a lawsuit to challenge the transaction. Ronald argued that something suspicious must have happened as his mother simply would not have gifted the property to only three of her eight children. He alleged that the signature on the property transfer documents must have been forged and suggested that the solicitor who prepared the documents was involved in some misconduct.
If what Ronald alleged was true, ownership of the property would not remain with the three siblings. Instead, the property would be said to be held “in trust” by those three siblings for Mrs. Hegel’s estate, to be divided in accordance with the terms of her will.
How the court reached its decision when settling this estate
No evidence of pressure or “undue influence”
At trial, Ronald was unable to provide any proof whatsoever to prove his allegations of undue influence. In fact, the evidence showed that Mrs. Hegel was lucid and fully capable of understanding what she wanted to do in the timeframe leading up to signing the property transfer. No one subjected her to undue influence or pressure. She received legal advice outside of the presence of any of her children and gave clear instructions to her lawyer that she wanted to make a gift of the property to three of her eight children.
Proof of intention to make a gift
Where a transfer is made gratuitously, the person receiving the transfer has to show that a gift was intended. This is so because the law presumes bargains, not gifts. The actual intention of the transferor at the time of the transfer is what matters.
When a gratuitous transfer is challenged, the courts apply certain “rebuttable presumptions” depending on the circumstances (a rebuttable presumption is a legal assumption that a court will make if there is not enough evidence to displace the presumption):
- The “presumption of resulting trust” is the general rule that applies to gratuitous transfers. A resulting trust arises when 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 owner. To rebut the presumption, the person who holds title to the property has to prove that the original owner meant to give them the property as a gift.
- The “presumption of advancement” is an exception to the general rule. It applies where property is gratuitously transferred from a parent to a child under the age of majority. In that limited situation, the courts will assume that a gift to the minor child was intended unless a person opposing the gift can prove otherwise.
In the Hegel case, the presumption of advancement did not apply because the defendants (the three adult children who held title to Mrs. Hegel’s property) were not minors. Since the presumption of resulting trust applied, the defendants had to provide evidence to discharge the presumption. In other words, the three children had to prove that Mrs. Hegel really did intend to gift the property to them.
Mrs. Hegel’s children and the solicitor who assisted Mrs. Hegel with the property transfer presented evidence to the court. The judge considered all of the evidence and determined that the defendants met the onus of demonstrating their mother’s intention. In the circumstances of a family of eight independent adult children, some of whom are better off financially than others, it made perfect sense that a mother would assist the children who she thought were the most in need. The presumption of resulting trust was thus rebutted and the three children got to keep the property.
The bottom line when settling an estate
A parent can make a gift of property to some adult children to the exclusion of others. If the gift was made during the parent’s lifetime, the property in question will not be an asset covered by the will when it comes time to settle the estate. Evidence that the parent intended to make the gift will be critical.
