Edith is an elderly widow. She is relatively healthy, but recognizes that she is deteriorating and is a bit more forgetful than she used to be. Edith needs help with her everyday activities and is having difficulty maintaining her house, but wants to stay there as long as possible.
Edith’s daughter Janet and Janet’s husband Steve are going through some financial difficulties. Edith has a great idea – she suggests that Janet and her family move into Edith’s house. That way, Edith will have help and company and Janet and Steve will get some financial stability.
Janet and Edith, who already had a good relationship, become even closer after Janet moves in. Janet takes Edith to all of her appointments and regularly cooks and cleans for her. Edith becomes somewhat dependant on Janet as her physical and, to a lesser extent, mental condition deteriorates.
Edith is appreciative and wants to reward Janet for everything that she has done for her. Edith’s other children come to visit occasionally, but they are not like Janet. Edith knows that she has a will which divides her estate equally between her children, but she decides that she wants to gift her house to Janet as an expression of her gratitude and to ensure that Janet keeps the house “in the family” after Edith is gone.
Edith’s plan is not uncommon, but her well-intentioned gift can be a source of bitter litigation for years to come if the transfer is not done properly.
Bale v. Bale1 is an example of the perils of such an inter vivos gift (a gift made during one’s lifetime). In that case, the Deceased lived on a farm with one of her three children. Her will, which had been prepared in 1995, divided her estate equally among her three sons. However, two years prior to her death, she transferred the farm to the son she lived with.
The Deceased’s other two children successfully brought an application to the Court to set aside the transfer alleging that the transfer was a product of undue influence. While the Court in Bale accepted that the Deceased had great affection for the son she lived with and that she was not close to her other sons, the Court still determined that the Deceased’s relationship with the son receiving the gift (the “donee”) gave rise to a presumption of undue influence and the donee lacked the evidence to rebut the presumption.
There is a plethora of cases with similar outcomes2.
While it may be difficult to avoid litigation, when an elderly parent prefers one child in their estate plan over others, the case law does provide some guidance for solicitors acting for clients like Edith as to what measures can be taken to best ensure that their client’s wishes are protected and conflict is avoided. These steps should include:
1 The party giving the gift must obtain independent legal representation3, preferably with someone who has acted on their behalf on previous matters and who has not acted previously for the donee of the gift;
2 That lawyer must explain to the donor the nature and effect of the transaction and almost as important, contemporaneously document the explanation provided4;
3 Determining that the donor has capacity to give the gift is not enough, the donor’s vulnerability/susceptibility to undue influence, must also be addressed by the lawyer5
4 Take objective precautions to ensure that the donor is acting independently such as6:
a. Meeting with the donor alone;
b. Explaining the full consequences of the gift as well as alternative courses of action available;
c. Inquire as to the reason for the transfer and emphasize the consequences of the transfer;
d. Make the donor aware that the gift to a person who is in a position of influence is subject to later court challenge and therefore a lot of precaution must be taken to ensure that a donor is free and independent;
e. Advise the donor to advise someone else, an independent party – such as a close friend or relative – of the steps being taken and the reason why the steps are being taken; and
f. Assess and document the donor’s capacity. If you have any concerns, suggest an assessment of the donor’s testamentary capacity and susceptibility to undue influence.
While none of the foregoing steps can ensure that inter vivos gifts won’t later be challenged, a solicitor who takes (and documents) these steps, provides the best chance for these types of claims from being initiated, or at least being resolved at an early stage.
You May Also Like:
- The Court of Appeal’s comments on undue influence in the context of a power of attorney dispute
- The Court of Appeal’s comments on capacity assessments and undue influence
- Are presents given to powers of attorney kosher?
- 2008 CarswellOnt 56 ↩
- Shipp v. Tremblay (1998), 22 ETD (2d) 161 (B.C. S.C.); Canada Trust Co. v. Ringrose, 2009 CarswellBC 3436 (B.C. S.C.); Killam v. Hanscom (2004), 11 E.T.R. (3d) 297 (N.B. Q.B.); Streisfield v. Goodman (2001), 40 E.T.R. (2d) 98 (Ont. S.C.J.); affirmed KeyCite history available (2004), 8 E.T.R. (3d) 130 (Ont. C.A.), leave to appeal refused KeyCite history available (2005), 336 N.R. 195 (note) (S.C.C.); Brandon v. Brandon, 2001 CarswellOnt 2688, (2001) O.J. No. 2986 (Ont. S.C.J.); affirmed (2003), 6 E.T.R. (3d) 210 (Ont. C.A.), leave to appeal refused (2004), 331 N.R. 396 (note) (S.C.C.) ↩
- Donis v. Georgopoulos, 2014 CarswellOnt 5155 at para. 71; also see Foley v. McIntyre, 2015 CarswellOnt 7680 (ONCA) at para. 39 ↩
- Bale v. Bale, 2008 CarswellOnt 56 at para. 93; Foley v McIntyre, 2014 CarswellOnt 209 (Ont. S.C.J.) at para. 152 ↩
- Bale v. Bale, 2008 CarswellOnt 56 at para. 102-105 ↩
- Foley v. McIntyre, 2014 CarswellOnt 209 (Ont. S.C.J.) at para. 152 aff’d at (ONCA) ↩