Defining A Gift- The Pecore Test
The Supreme Court of Canada decision of Pecore v. Pecore [2007] 1 S.C.R. 795 provides the test to determine whether the transfer of an asset (bank accounts, cars, real estate, property, dogs, cats, jewelery, etc.) are gifts that the recipient gets to keep.
The effect of the Pecore decision, in very general terms, is that when an asset is transferred to a third party (adult children included) for no payment there is a presumption that the transfer was not a gift. There is a reverse onus on the person who received the asset to prove that a gift was intended, and if they do not prove that a gift was intended then it will be found that they actually hold the asset in a resulting trust for the original owner.
So let’s say I give you the keys to my car and say “it’s yours” and nothing more, and you pay me nothing for the car. My estate could compel you to prove that I actually intended to gift the car to you and if you cannot prove it then you would have to give it back to my estate.
A classic estate law example of the application of the Pecore principle is that of a parent putting a property into joint names with one but not all of their children for an ill-conceived for the likely estate planning purpose. This may cause a legal dispute if that one child asserts, and the other children disagree, that the asset was intended to be a gift rather than forming part of the estate of the parent.
We would be happy to discuss the circumstances of your particular situation with you. Nanaimo Estate Law has many years of experience in this subject area.
Applying Pecore- Extract of Fuller vs. Harper, 2010
The following extract of our Court of Appeals decision of Fuller v. Harper, 2010 BCCA 421 pretty much covers the field in terms of the legal analysis and the application of Pecore in British Columbia despite it being ten years old at this time. The full case can be found here http://canlii.ca/t/2cr4j , and the excerpt is found below as follows:
The Presumption of Resulting Trust
[43] While academics have posited that it remains unsettled as to whether the presumption of a resulting trust for gratuitous transfers applies to real property (see A. Warner La Forest, ed., Anger & Honsberger: Law of Real Property, 3d ed., loose-leaf (consulted on 13 September 2010), (Aurora: Canada Law Book, 2008), vol. 1, ch. 11 at 36), for the purpose of this appeal the parties have assumed that the presumption does apply. There is also authority from this Court that would appear to support that view: Bajwa v. Pannu, 2007 BCCA 260.
[44] Pecore is the leading decision on the application of the presumption of resulting trust in circumstances of a gratuitous transfer. The presumption is “a legal assumption that a court will make if insufficient evidence is adduced to displace the presumption” (Pecore at para. 22). It arises when “title to property is in one party’s name, but that party, 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: Waters’ Law of Trusts in Canada (3d ed. 2005), at p. 362” (Pecore at para. 20).
[45] Mr. Justice Rothstein, writing for the Court, explained how the burden of proof is affected by the presumption of resulting trust:
[24] [W]here a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended: see Waters’ Law of Trusts, at p. 375, and E.E. Gillese and M. Milczynski, The Law of Trusts (2nd ed. 2005), at p. 110. This is so because equity presumes bargains, not gifts.
Therefore, the onus is on the transferee to lead evidence of “the transferor’s contrary intention on the balance of probabilities” in order to rebut the presumption (Pecore at para. 43).
[46] Rothstein J. also explained the methodology to be employed when the presumption of resulting trust is engaged:
[44] … The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention. …
…
[55] Where a gratuitous transfer is being challenged, the trial judge must begin his or her inquiry by determining the proper presumption to apply and then weigh all the evidence relating to the actual intention of the transferor to determine whether the presumption has been rebutted….
[47] The effect of the presumption only becomes evident after all the evidence, both direct and circumstantial, on the surrounding circumstances in which the transfer was made, has been weighed. Only if the trial judge is unable to reach a conclusion about the transferor’s actual intention at the time of the transfer, will the presumption be applied to tip the scales in favour of the transferor or his estate: Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 3d ed. (Markham, ON: LexisNexis Canada, 2009) at page 159, § 4.60.
[48] In Pecore, Rothstein J. also discussed the nature of the evidence to be considered. In general, evidence of the transferor’s intention “at the time of the transfer ‘ought to be contemporaneous, or nearly so’ to the transaction” (at para. 56 referring to Clemens v. Clemens Estate, 1956 CanLII 3 (SCC), [1956] S.C.R. 286 at 294 citing Jeans v. Cooke (1857) 24 Beav. 513, 53 E.R. 456, and referring to Viscount Simonds’ rule in Shephard v. Cartwright (1954), [1955] A.C. 431 (U.K. H.L.), at 445 citing Snell’s Principles of Equity (24th ed. 1954), at p. 153). He observed that the admissibility of evidence on post transfer conduct or statements has traditionally been “viewed with mistrust by courts… because a transferor could have changed his or her mind subsequent to the transfer and because donors are not allowed to retract gifts” (para. 56). He also noted, however, that evidence by a party to the litigation may be admissible against that party for a limited purpose if it is found to be relevant to the issue of the transferor’s intention at the time of the transfer (referring to Taylor v. Wallbridge (1879), 1879 CanLII 1 (SCC), 2 S.C.R. 616 cited in Pecore at para. 59).
[49] In adopting this more liberal stance on the admissibility of post transfer conduct, Rothstein J. cautioned that the trial judge “must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention” (Pecore at para. 59). The assessment of the reliability of post transfer conduct admitted into evidence will include an assessment of the reasonableness of any inferences that are sought to be drawn from that conduct, including the inherent probability or improbability of competing explanations as to the transferor’s intent: Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 3d ed. (Markham, ON: LexisNexis Canada, 2009) at p. 209, §5.61. In short, the court must consider if the transferor had any rational purpose for the transfer other than a gift (Pecore at paras. 45-47).
[50] Where a dispute arises over the characterization of a gratuitous transfer after the death of the transferor the evidence of the transferor’s intention at the time of the transfer is likely to be circumstantial. However, where it is available, the best evidence of the transferor’s intention will be the direct evidence of the transferee as to the circumstances in which the transfer occurred (Pecore at para. 26).
Joint Tenancy and the Right of Survivorship
[51] Integral to the discussion of whether the presumption of resulting trust has been rebutted in this case, is an appreciation of the concept of the right of survivorship that is in inherent in the creation of a joint tenancy. The right of survivorship provides that where a joint tenancy continues until the death of a joint tenant the interest of the deceased joint tenant is extinguished and passes to the surviving joint tenant: E. H. Burn, Cheshire and Burn’s Modern Law of Real Property, 14th ed. (London: Butterworth & Co. (Publishers) Ltd. 1988) at 208-9. A joint tenant may sever his or her interest in the joint tenancy during his or her lifetime and thereby convert the interest into an interest as a tenant in common (A.J. McClean, “Severance of Joint Tenancies” (1979) 57 Can. Bar. Rev. 1 at 2), however, that did not occur in this case.
[52] The significance of the right of survivorship in a joint tenancy was explained in Pecore:
[48] Courts have understandably struggled with whether they are permitted to give effect to the transferor’s intention in this situation. One of the difficulties in these circumstances is that the beneficial interest of the transferee appears to arise only on the death of the transferor. This has led some judges to conclude that the gift is testamentary in nature and must fail as a result of not being in proper testamentary form [citations omitted]. For the reasons that follow, however, I am of the view that the rights of survivorship, both legal and equitable, vest when the joint account is opened and the gift of those rights is therefore inter vivos in nature. This has also been the conclusion of the weight of judicial opinion in recent times: see e.g. Mordo v. Nitting, [2006] B.C.J. No. 3081, 2006 BCSC 1761 (B.C.S.C.) at paras: 233-38; Shaw v. MacKenzie Estate (1994), 4 E.T.R. (2d) 306 (N.S.S.C.), at para. 49; and Reber v. Reber (1988), 1988 CanLII 3357 (BC SC), 48 D.L.R. (4th) 376 (B.C.S.C.); see also Waters’ Law of Trusts, at p. 406.
[53] In sum, when dealing with real property an undivided one-half interest held as a joint tenant is to be distinguished from a divided one-half interest held as a tenant in common. Upon death, the interest of a tenant in common passes into his or her estate while the interest of joint tenant, which carries with it the right of survivorship, passes to the surviving joint tenant. In other words, the legal and equitable title (the right of survivorship) of a joint tenancy vests at the time the joint tenancy is created. Therefore, the gift of a joint interest in real property is an inter vivos rather than a testamentary gift and cannot be retracted by the donor. It is a “complete and perfect inter vivos gift” (Pecore at para. 49 referring to Ferguson J.A.’s comments in Reid, Re (1921), 1921 CanLII 534 (ON CA), 64 D.L.R. 598, 50 O.L.R. 595 (Ont. C.A.) at 608).