This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.
By Kimberly Gale and Aradhna Mahajan
Gifts are given as a token of affection and care to a loved one and are viewed as an attractive estate planning tool. According to Black’s Law Dictionary (7th ed.), a “gift” is a voluntary and gratuitous transfer of property without seeking any direct or indirect benefits in consideration for the transfer. It is legally effective only when the donor of the gift had a donative intention, the gift was delivered to the donee and accepted by him/her.
Such gifts could be made and delivered in the donor’s lifetime (inter vivos) or made on a person’s deathbed and become effective only when the person dies (mortis causa). These gifts could also be remunerative in nature when they compensate for the services rendered to the donor.
It is important that gifts are properly planned to avoid unintended consequences after the donor’s death. Gifts in many instances can lead to family feuds or worsen the already strained relations in some families.
Take Fica v. Dmytryshyn 2018 ONSC 2034, for example.
In this case, there was a long-standing feud between two brothers Bryan Fica and Taras Demerson, their uncle Ned Dmytryshyn and their deceased mother Nadia Dmytryshyn. Nadia favoured and financially supported Taras, including in the last six months of her life when he had the power of attorney. Bryan has had no contact with his family for approximately 15 years. When he came to know about this fact, it made him jealous and resentful. He sued his younger brother Taras and uncle Ned for misappropriating funds from Nadia while they were acting as attorneys for her property and as estate trustees.
When deciding the case, Justice Paul Perell of the Ontario Superior Court took note of the fact that Bryan had no communication with his family for almost 15 years. This is compared to Taras and Uncle Ned who had a close relationship with Nadia. Taras spoke to his mother several times a week and visited her once a week. In return, Nadia was always extremely generous to Taras and continued to indulge him even after she became terminally ill.
Even though Bryan is entitled to be upset that his mother favoured the unworthy Taras, from the legal perspective Nadia was free to make her decision. Justice Perell determined in paragraph 21, that Nadia was “competent to make the decisions that she did. … Bryan may not have liked it, but this was Nadia’s prerogative and her choice.”
There were two main points that can be gleaned from this case. First, a person who is mentally competent is free to favour one child over the other. Second, a proper accounting of the estate is a duty of the estate trustees. While the facts of the case present a messy and complicated family dynamic, the law remains clear.
So, what to do instead of “Gift first and ask later”?
One important lesson we can learn from this case is to document the intention behind a gift through a Declaration of Intention or a Deed of Gift. Documenting your gifts can help ensure that the donor’s wishes are met and can avoid arguments among family members at the time of or after the actual transfer. Gift of Deed also serves as evidence to the Canada Revenue Agency that probate need not be paid where assets were passed outside an estate.
Intention and competency to make gifts is paramount. If Nadia had documented her intention to make gifts to Taras and her brother Ned in this case, it might have saved the family six years of rigorous litigation after her death.
Aradhna Mahajan is a recent master of law graduate from University of Toronto.