Suppose Jane knew she was dying and gave the keys to her cottage to her favourite niece. Jane’s lawyer transferred title of the cottage to the niece. After Jane’s death, her husband, Mark started a law suit against the estate for support. He claimed to be a dependant and sought to have the capital value of the cottage deemed to be part of the net estate for purposes of ascertaining the value of estate. His lawyers claimed that the gift was invalid. Let’s take a moment to review Mark’s claim.
In his seminal text, Waters’ Law of Trusts in Canada, 3rd Edition, Professor Waters states,
“For a gift mortis causa to arise there are three requirements: 1. an intention to give immediately, but subject to the condition that absolute title shall vest in the donee only on the donor’s death; 2. Delivery in the appropriate form, though in this case a chose in action can be given by delivery of the document by which it is represented, and; 3. a contemplation of death at the time of the intent and delivery.”1.
Spouses and children who are disinherited often commence applications for dependant’s relief under Part V of the Succession Law Reform Act, R.S.O. 1990, c. S.26. Even if a party qualifies as a dependant, it is important to ensure that there is sufficient assets in the estate to fund support. To that end, section 72 of the Succession Law Reform Act, R.S.O. 1990, c. S.26 includes assets which ordinarily are normally excluded to fund that support. One such asset is a “gift mortis causa”.
The first question Mark must ask is whether the “gift” was just a gift or was it a gift mortis causa. It’s an important distinction because, except under certain circumstances, Jane is allowed to give her belongings away during her lifetime. A regular gift is not considered to be a section 72 asset. Let’s see how the case law understands the meaning of “gift mortis causa”. The explanation of gifts mortis causa dates back to the late 1800s. In Cain v. Moon 2, the court provided the classic definition. The court stated:
“It is…conceded that for an effectual donatio mortis causa three things must combine: first, the gift or donation must have been made in contemplation, though not necessarily in expectation, of death; secondly, there must have been delivery to the donee of the subject-matter of the gift; and, thirdly, the gift must be made under such circumstances shewing that it is to take effect only if the death of the donor follows…3“
Although there have been very few Canadian decisions which expand upon this definition, the Court of Appeal has provided some guidance. Whether a donation is made in ‘contemplation, though not necessarily in expectation of death’ can be hard to identify. The Court of Appeal has stated that the donor must be in extremis at the time of making the gift 4. Essentially, a person must be beyond the hope of recovery and near death to be in extremis. In our case, Jane knew she was dying. She knew she had no hope of recovery and was near death, so the first part of the test was met.
The second element of the test relates to the laws of gifts; more specifically, there must either be actual or constructive delivery of the gift by the donor. For example, if the donor handed a Picasso to the donee, that would constitute actual delivery. An example of constructive delivery, on the other hand, would be the donor handing the donee keys to his Ferrari (as opposed to the Ferrari itself). In our case, not only did Jane give her niece the keys to the cottage – she transferred title. The second prong of the test has been met.
Finally, and perhaps most challenging, is the third element. This part of the test states that the gift can only take effect if the death of the donor follows the gift having been made. Bayoff Estate 5] is an interesting case on point. In that case, the deceased was diagnosed with cancer and his demise was imminent. The keys to a safety deposit box were given to the donee. The first two elements of the test for gifts mortis causa were easily fulfilled. However, the court had to delve into the difficulties of the third prong of the test. The court noted that the deceased had not indicated that the gift was conditional on death in the required sense. Bayoff did not, either by words or by action, suggest that the gift was to take effect only if he died. The court also noted that the gift was made during the donor’s lifetime, but title would not vest until the donor died. In its conclusion, the court stated:
Bayoff did not, either by words or actions, suggest that the gift was to take effect only if he died. He had just finished signing a Will in contemplation of his death. It is likely that any gifts which he intended to take effect on death were included in his Will. The gift of the contents of the safety deposit box, in my opinion, was intended to be a gift inter vivos6
In this case, the court focused on the timing that the will was made in its determination of whether the gift was indeed a gift mortis causa. Based on this conclusion, the gift in question was not a “gift mortis causa”. If we apply this test to our fact situation, title to Jane’s cottage was transferred to her niece during Jane’s lifetime. It was intended to take place when the transfer was made – not on Jane’s death. Hence – it is not a gift mortis causa and will not be included as a section 72 asset. Mark , the spouse/dependant, will not be able to treat the capital value of the cottage as part of his wife’s estate for the purpose of funding his dependant’s relief claim. The transfer was just an inter vivos gift 7.
Whether the gift in question will be considered a section 72 asset for the purpose of dependant’s support under the Succession Law Reform Act, R.S.O. 1990, c. S.26 is not a simple issue.
- Waters’ Law of Trusts in Canada, 3rd Ed., 6 — Constituting or Setting up the Trust, 6.XI — Exceptional Modes whereby the Trust Becomes Completely Constituted (Waters) ↵
- (1896) 2 Q.B. 283 at 286. ↵
- Ibid. ↵
- Thompson v. Mehan (1958) O.R. 357. ↵
- [1. Re Bayoff Estate S.K.Q.B. 23. (Bayoff). ↵
- Bayoff, supra note 4 at 10. ↵
- See Waters whose explanation on this issue is informative. He states, “It should be recalled that for a gift inter vivos to be valid at common law there must be an intention to give immediately, and a deed of gift or actual delivery. Delivery passes the donor’s dominion over the property to the donee, and must therefore be in the appropriate form to pass the full title in the property in question. For a gift mortis causa to arise there are three requirements: 1. an intention to give immediately, but subject to the condition that absolute title shall vest in the donee only on the donor’s death……” ↵