Gifts through the Lens of Doherty v. Doherty, Part One

Gifts through the Lens of Doherty v. Doherty, Part One

Co-written by: Kim Gale and Palak Mahajan

The law of gifts was at issue in the Ontario Superior Court of Justice in Doherty v. Doherty, 2023 ONSC 1536 (Doherty), upheld by the Court of Appeal.

The court in Doherty reinstated the law on inter vivas gifts.

The court considered the law on gifts, the three-part test that a donee must meet to prove a gift, the necessity of delivery of a gift and the evidence needed to corroborate the intent of a gift. The court held that the claim by the respondent in Doherty relating to the gift was unfounded and did not meet the laid down test to prove a gift. Through this two-part series of articles, the authors will discuss the law on inter vivas gifts as reiterated by the court in Doherty.

 Inter vivos gifts                                                                                                      

"Inter vivas" is a Latin phrase that means "during life" or "among the living." As such, an inter vivas gift or inter vivas transfer, refers to any gift or transfer made by someone while they are alive. In the simplest terms, an inter vivas gift is property that was transferred while the gift-giver was living.

Inter vivos gifts can be anything - cash, financial accounts, real estate or even joint tenancy in a property.

Benefits of inter vivos gifts

Inter vivas gifts are an extremely powerful estate planning tool. When an inter vivas gift is given, the asset will not be considered part of the deceased's estate. This saves on estate administration tax on the asset and the donee will receive the asset much sooner than if it went through the estate administration process. However, for an inter vivas gift to be legally binding, it must meet certain thresholds, discussed in the later part of this article, and elaborated by the court in Doherty.

Facts/background of Doherty: Cast of characters

  1. The dispute was about the property owned by the deceased, Molly Marie Doherty (Molly). The dispute was between Molly's daughter and the applicant, Kathleen Marie Doherty (Kathleen) and the respondents, Molly's son, Terrence Doherty (Terrence), Terrence's spouse, Sylvia Joan Kurkowski Doherty (Sylvia) and their son, Liam Alexander Doherty (Liam).
  2. Molly executed a power of attorney for property dated 29, 2017, appointing Terrence as her attorney for property and his daughter, Meaghan Marie Doherty (Meaghan) as the alternative attorney. Meaghan was not a part of the proceedings before the court.
  3. Thereafter, on June 14, 2018, Molly executed a new power of attorney with property with the assistance of a lawyer. She appointed Terrence as her attorney for property and Sylvia as her alternative attorney for property. Molly also executed a will in which she left the residue of her estate to Terrence and failing Terrence, to Sylvia.
  4. Molly owned one house and the same was sold on 10, 2018. The Agreement of Purchase and Sale was signed by Molly and Terrence in his capacity as attorney for property. The house was sold for $260,000 and proceeds of $243,418.95 were deposited in Molly's account on Oct. 2, 2018.
  5. Between June 1, 2018, and Aug. 14, 2019, more than $370,000 had been withdrawn from Molly's bank account. Terrence did not dispute that within 20 days of the deposit of proceeds of $243,418.95 from the sale of the house, he arranged for a total of $230,000 to be transferred to Sylvia and
  6. During this time, on Aug. 2, 2019, Kathleen arranged for a capacity assessment of Molly. It was assessed that Molly met the legal criteria to assign/revoke a power of attorney for property and power of attorney for personal care.
  7. On 13, 2019, Molly executed a new power of attorney for property and a new power of attorney for personal care. In both these powers of attorneys she appointed Kathleen as her attorney. She also executed a new will in which she appointed Kathleen as her estate trustee, and she bequeathed her estate to the applicant and Meaghan in equal shares.
  8. Molly died on 11, 2019, at 84 years of age.

Application by Kathleen 

  1. Initially, Kathleen filed an application seeking an accounting from Terrence for $709,515.01 (the sum appearing to be missing from Molly's bank accounts).
  2. During the proceedings, Terrence admitted that while he was acting as Molly's attorney for property $370,822.63 was withdrawn from Molly's bank accounts. Terrence also admitted that this amount $329,745.02 (transferred amount) was transferred into accounts held directly or indirectly by each of Sylvia, Liam and himself.
  3. Liam admitted that he received $78,000 of the transferred amount. Liam claimed that $23,000 was a gift to him from Molly and the remaining $55,000 was a loan.
  4. The court found that the transferred amount was not a gift and that Terrence and Sylvia were jointly and severally liable for the damages arising from the wrongful removal of the transferred

Law regarding gifts

The court discussed the law on gifts extensively. The definition of "gift" was discussed in McNamee v. McNamee, 2011 ONCA 533, at para. 23 to be a voluntary transfer of property to another without consideration. Further, to make a delivery or transfer, the donor must divest himself or herself or all power and control over the property and transfer such control to the donee.

In Kavanagh v. Lajoie, 2014 ONCA 187, the Ontario Court of Appeal opined:

For a gift to be valid and enforceable it must be perfected. In other words, the donor must have done everything necessary and in his power to effect the transfer of property. An incomplete gift is nothing more than an intention to gift. The donor is free to change his mind. Bergen v. Bergen [2013] B.C.J. No. 2552.

The Court of Appeal for Ontario in Teixeira v. Markgraf Estate, 2017 ONCA 819 at para. 38, set out the three-part test that a donee must meet to prove a gift. The donee must show:

  1. An intention to make a gift on the part of the donor, without consideration or expectation of
  2. Acceptance of the gift by the
  3. A sufficient act of delivery or transfer of the property to complete the

Section 13 of the Evidence Act, R.S.O. 1990, c. E. 23 states that a claimant may not obtain a decision "on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some material evidence."

In Bakken Estate v. Bakken, 2014 BCSC 1540, the court examined the evidence a judge can consider when deciding a transferor's or giftor's intentions:

  • A party opposing the claim of a gift may adduce evidence of intent that arose sometime after the transfer occurred. The modern rule is that evidence of intention that is not contemporaneous to the time of transfer, or nearly so, should not be excluded.
  • For evidence to be included, however, the judge must find it relevant to the intention of the transfer at the time of the transfer, and the trial judge must assess its reliability, guarding against self-serving evidence that tends to reflect a change in intention.

This is the first of a two-part series.

 

This article was originally published by Law360 Canada, part of LexisNexis Canada Inc.

 

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