As I have recently discussed, gratuitous inter vivos transfers made without consideration frequently give rise to Vancouver estate litigation. As people age they often transfer property gratuitously to their adult children, and then hold it with them in joint tenancy. If, after the parent dies, it is unclear whether the parent intended to gift the property to the child, then the presumption of resulting trust will apply, with the effect being that the child holds the property in trust for the parent’s estate, to be distributed in accordance with the parent’s will. The intention of a person who transfers property gratuitously to another is sometimes difficult to determine, particularly in the situation just described where the transferor is deceased. However, as the BC Court of Appeal emphasized in McKendry v. McKendry, 2017 BCCA 48, if there is sufficient evidence of the transferor’s actual intention, the presumption of resulting trust is not required to determine the outcome of the case.
Vancouver estate litigation to determine beneficial ownership
Mary McKendry owned a home on West 48th Avenue in Vancouver. Estate litigation arose after Mary’s death on February 23, 2012 to determine beneficial ownership of the property. The evidence established that in 2008, Mary transferred legal title to the property into joint tenancy with her son John, with the intention that John would hold the property in trust for her estate. In 2010, Mary decided to remove the trust conditions so that John would receive the property absolutely on her death and Mary informed her lawyer in writing accordingly. When she executed her will in 2010, Mary also signed a two-page document, which provided: “… I want my home to be my son’s property on my death absolutely – no strings attached. I have made this decision after much consideration and I fully understand that this gives my son the majority of my assets. My house constitutes the majority of my assets.” Mary’s will provided that the residue of her estate was to be divided equally among her four daughters.
Three of Mary’s daughters commenced the estate litigation, arguing that John held the property in trust for Mary’s estate and seeking variation of the will. The sisters said that Mary’s intention in January 2008 when she transferred the property into joint tenancy should govern the outcome of the case. The trial judge agreed with the sisters and found that John held beneficial title to the property on a resulting trust for his late mother’s estate. On appeal, Dickson J.A. concluded that the trial judge erred in declaring John held the property in trust for Mary’s estate. In the Court of Appeal’s view, Mary’s intentions in 2008 and 2010 were manifest and unambiguous. At the time of the transfer in 2008, Mary clearly did not intend to gift to John a beneficial right of survivorship in the property. From January 2008 onward, John held legal title with Mary jointly and all of the beneficial interest, including survivorship rights, in trust. However, the evidence established that Mary changed her intention in 2010. In the two-page document prepared by her lawyer, Mary unambiguously renounced her beneficial interest in the right of survivorship in John’s favour should he survive her. In doing so, she clearly intended to make an immediate inter vivos gift of that incident of the joint tenancy to John. As the last surviving joint tenant, John took full ownership of the property and it was unnecessary to vary Mary’s will.
Specific rules apply to transfers of land
A central issue on appeal was whether the trial judge erred in finding that Mary was required to execute a written deed of gift under seal to perfect the gift to John of the right of survivorship in the property. Transfers of land are subject to statute. Pursuant to the Law and Equity Act, contracts respecting land must be in writing to be enforceable. Pursuant to the Land Title Act, transfers of land must be in a prescribed or otherwise acceptable form and registered against title to land. Dickson J.A. held that Mary’s renunciation of her beneficial interest in the right to survivorship did not amount to a “disposition” of land pursuant to s. 59(1) of the Law and Equity Act. Accordingly, the requirements of s. 59(3) that the contract be in writing did not apply. And in any event, the two-page document in which Mary renounced her interest was a signed writing as contemplated by s. 59(3).
Given that she had previously transferred legal title to the property to John in joint tenancy, Mary did everything necessary in December 2010 to give her beneficial interest to John. Her intention was made manifest in the signed two-page document her lawyer prepared and no further act of delivery was required because of the existing joint tenancy. Nothing more would have been gained had Mary executed a deed of gift under seal, given her clear and formally expressed intention. The immediate inter vivos gift was complete and binding.
Joint tenancy and the right of survivorship
In rendering her decision, Dickson J.A. provided a helpful overview of the form of concurrent property ownership known as joint tenancy. Here are the key principles:
- The principal characteristic of joint tenancy is the right of survivorship. When a joint tenant dies, his or her interest in property is extinguished. If there is more than one surviving joint tenant, they continue to hold the property as joint tenants. The last surviving joint tenant takes full ownership of the property.
- So long as the requirements of a binding gift are met, the owner of property may, during his or her lifetime, make an immediate gift of a joint tenancy, including the right of survivorship. This is so regardless of whether the donee of the gift is to hold it for the benefit of the donor while he or she is alive. When gifted inter vivos, the right of survivorship is a form of expectancy regarding the future. It is a right to what is left of the jointly-held interest, if anything, when the donor dies.
- A donor may gift the right of survivorship, but continue to deal freely with property throughout his or her lifetime. The fact that a “complete gift” may have been given and that this gift included a right of survivorship does not prevent a donor from dealing with the retained joint interest while alive. The right of survivorship is only to what is left. Accordingly, if one joint owner drains a bank account (in the case of personal property) or severs a joint tenancy (in the case of real property), there is nothing in the right of survivorship itself that somehow prevents this.
Gifts and resulting trusts
Dickson J.A.’s reasons also contain a summary of how the presumption of resulting trust is to be applied, which will be of assistance in all Vancouver estate litigation:
- Two requirements must be met for an inter vivos gift to be legally binding: the donor must have intended to make a gift and must have delivered the subject matter to the donee. The intention of the donor at the time of the transfer is the governing consideration. In addition, the donor must have done everything necessary, according to the nature of the property, to transfer it to the donee and render the settlement legally binding on him or her.
- The standard for proving a gift is the usual civil standard of a balance of probabilities.
- A resulting trust arises when title to property is held in the name of a party who gave no value for it. In such circumstances, that party is obliged to return the property to the original title owner unless he or she can establish it was given as a gift. In the case of a gratuitous transfer, a rebuttable presumption of resulting trust applies when the transfer is challenged. The judge commences the inquiry with the presumption, weighs all of the evidence, and attempts to ascertain the actual intention of the transferor. The governing consideration is the transferor’s actual intention. The presumption of resulting trust determines the result only where there is insufficient evidence to rebut the presumption on a balance of probabilities
Vancouver estate litigation: The bottom line on gratuitous transfers of property
The actual intention of the transferor is the governing consideration in Vancouver estate litigation. The presumption of resulting trust determines the result only where there is insufficient evidence of intention to rebut the presumption on a balance of probabilities. When legal title to property is transferred gratuitously and the presumption of resulting trust applies, the right of survivorship is held on trust by the transferee.
