When a parent dies, it is common for their children to come together to handle the estate. However, this can lead to a number of disputes which may end up in litigation. When siblings cannot agree, the courts can step in to provide clarity. This allows them to determine how the estate should be split and how much each sibling should receive.
The Ontario Superior Court of Justice recently heard a disagreement between siblings on how their late mother’s property was to be divided and whether the transfer of her family home created a resulting trust.
The deceased needed help managing her affairs after her husband’s passing
In Re Estate of Celeste Dos Santos, the deceased and her husband moved to Canada from Portugal in 1968. The couple had three sons: Rui, Luis, and John. They worked to purchase their family home, Roxton, which had two units. The family moved into the bottom level while the upper level was rented out.
Rui moved out of Roxton in 1982 after purchasing his own home. Luis moved out of Roxton in 1992. However, John remained in Roxton as he had lived there since he was two years old. In later years, John’s wife Patricia moved in. The deceased’s husband passed away in 1995, two years before Patricia moved in. Patricia and John lived with and cared for the deceased until she died in 2013.
In 2001, the brothers met to discuss a plan to ensure the ongoing care of their mother and her finances. The mother spoke no English and could not read or write, so she needed help keeping her affairs in order. The brothers, however, could not agree on what exactly had been decided in that discussion.
Despite the disagreements, one thing was certain: John opened up a joint account with their mother to hold her income. This was to help facilitate payments John was making on her behalf. After the meeting, the deceased executed a deed of transfer of Roxton to John. In 2003, John transferred this into a joint tenancy with his wife.
The mother passed away in 2013. Unbeknownst to John, she had received a payout from the Portuguese government for expropriating land she and her husband still owned abroad. She gave Rui and Luis equal shares of $96,000 while John received nothing. John did not know about these payments to his brothers. His brothers also did not consider that, without knowing of these payments, John might be forced to pay them equalization payments if Roxton was sold.
Elder brothers argued home transfer was resulting trust
After the mother died, Rui and Luis discovered the transfer of the family home to John in 2001. They argued that Roxton should form part of the estate because the transfer had been done with the intention of creating a resulting trust.
The Superior Court explained that a resulting trust occurs when one person transfers property to another while retaining an interest in it but then dies before they have had an opportunity to transfer their interest back into their own name. A resulting trust arises when no written agreement specifies who owns the property.
The leading authority on the presumption of a resulting trust is the Supreme Court of Canada’s decision in Pecore v. Pecore. That decision stated that just because an elderly parent is naming a child on the title of an asset does not mean they are making a gift. Instead, it is presumed that the child is holding that property in trust for their parent to help manage their affairs in a resulting trust. This is presumed unless evidence demonstrates otherwise on a balance of probabilities.
Of course, sometimes, a parent does indeed intend to give a formal gift to their child. The Supreme Court acknowledged this in Pecore and held that the party who claims that the transfer was a gift must prove, on a balance of probabilities, the existence of three elements:
- An intention to make a gift on the part of the donor;
- An acceptance of the gift by the donee; and
- A sufficient act of delivery or transfer of the property to complete the transaction.
In this case, elements (2) and (3) were not being disputed by Rui or Luis. Instead, the case centred on the deceased’s intention to make the gift.
The brothers disagreed on what was discussed before their mother’s death
The brothers had differing understandings of what transpired in their 2001 meeting to discuss the care of their mother. Rui had been under the impression that Roxton would be split amongst the three of them, with John receiving more for caring for their mother. Rui also assumed that the title to the property was transferred to John to help him care for their mother. However, the Court questioned this submission as the title did not need to be in John’s name for him to look after the property or even to borrow against the house.
Luis, meanwhile, did not believe John was supposed to get title and assumed John would pay them a share of the home’s value after their mother’s death.
Court determined property transfer was a gift
In finding that the presumption of resulting trust had been rebutted, the Court relied on the following facts:
- In 2001, Rui and Luis lived in their own homes. John still lived with his mother at Roxton and had done so since he was two.
- After the deceased’s husband’s death, John (and, later, John and his wife Patricia) took primary responsibility for looking after Celeste and her affairs. All three continued to live together in Roxton until Celeste’s death.
- The proceeds from the expropriation of the mother’s Portugal property were primarily given to Rui and Luis. John knew nothing about the details of the transfers of these funds to his brothers at the time.
- The only evidence of Roxton’s value in 2001 is John’s evidence that it was worth about $330,000. Each of Rui and Luis received approximately $96,000 from their mother as a result of the Portugal expropriation; that is, an amount representing roughly a third of the 2001 value of Roxton.
- In contrast to the deed of outright transfer of Roxton to John, John and his mother had a joint account to hold her cash, from which her expenses were paid.
- John collected the rent from the tenant at Roxton. No one ever took issue with this until 2021, when this litigation commenced.
- John transferred title to himself and his wife as joint tenants in 2003. This transfer was registered on title. No one ever took exception to this transfer until 2021.
- John encumbered Roxton to pay personal debts. These mortgages were registered on title. No one ever took exception to those mortgages until 2021.
The Court ultimately decided against Rui and Luis’s memory of the events. It determined that the deceased did indeed intend to gift John with Roxton.
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