April 4, 2024
We have written before about resulting trusts, and the case of Pecore v Pecore which says that when you give a gift to an adult child, the presumption in law is that you are transferring only the legal title and that you are still the beneficial owner.
THE ISSUE
But how could your child rebut that presumption and prove that intended a gift?
THE CASE
A Superior Court judge in Wiffin v. Lau pulls together principles from earlier cases and applies them to a common situation.
In that case, the owner transferred properties into the names of himself, his daughter and son-in-law. A lot of financial advisors recommend this sort of transfer, either to simplify the estate, or more often, save probate fees.
This is not always a good idea. Sometimes it creates unintended problems. Wiffin illustrates this risk.
The daughter was the child of the father’s first wife. Sometime after the transfer, the father remarried and wanted the title to the house solely in his name, to benefit the second wife upon his death.
If Dad retained the true or beneficial ownership despite the transfer of legal title, no problem. But to claim beneficial ownership, Dad needed to rely on the presumption of resulting trust.
But any presumption can be rebutted by evidence to the contrary. If it is a gift, you cannot take it back. As the judge says:
The transferee’s intention at the time of the transfer is the only relevant intention. Where a gift is intended, the fact that the donor comes to regret the gift based upon an unexpected turn of events cannot cause an otherwise absolute gift to morph into a conditional one
On cross-examination on his affidavit, Dad stated that one of his reasons for doing the transfers was to save the daughter taxes (probate fees) upon Dad’s death.
Prior cases had decided that the “saving of probate fees as an intention at the time of transfer supports a rebuttal of a resulting trust”. It was not the only factor relied upon by the judge to rebut the presumption, but it was significant.
The presumption was defeated and the daughter and son-in-law were entitled to a beneficial interest in the properties. Dad could not gift the properties to his new wife in his will in their entirety.
TAKEAWAYS
- Careful thought about the future needs to be part of your planning.
- Documenting your intention to gift or not may avoid hardship later on, as circumstances change.
- Care must be taken in drafting affidavits, and
- Though every witness must be honest under cross-examination, that is where bad things can happen, so careful witness preparation is important.
HOW WEILERS LLP CAN HELP YOU
We can be your trusted advisors on estate planning issues. We will work with you and your financial advisors to avoid unintended results.
If you find yourself in a lawsuit over property, the experienced litigation team at Weilers LLP may be the right lawyers for you.