Monday, April 18, 2005
As part of estate and tax planning, many people are using joint tenancies and transferring property to their children as a means of planning their estate while alive. However, many of these transfers are open to challenge after the death of the transferor. Other family members will often challenge the transfer on the basis that the Transferor did not really intend the transfer to be a gift - and that the transfer was done merely in order to avoid the payment of estate administration tax with respect to the asset in question.
The disgruntled children (who have not received any part of the "gifted" property) argue that the transferee holds the property received in trust for the estate of the transferor. They base their argument on the basis of the doctrine of the Presumption of Resulting Trust. In many of these transfers, the doctrine will apply and it will be up to the transferee to rebut the presumption by showing that there was clearly an intention to gift.
What often occurs, however, even if a gift were intended, is that there is insufficient evidence to prove the gift and rebut the presumption. As a result, the Courts may find that the transfered property is actually an asset of the estate of the transferor.
In order to ensure the ability to rebut the presumption of resulting trust, the gift should be properly documented. For instance, a deed of gift could and should be prepared,and executed, if indeed, it is the intention of the transferor to make a gift.
Being able to fully prove the gift could avoid long and acrimonius litigation and disharmony in the family.
What is even more worrisome from an estate planning perspective is that recent case law has found that the doctrine of the presumption of resulting trust, may also apply to the designation of benificiary designations for Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs). If this is the case then the donee (the designated beneficiary) will be put on the defensive and be required to prove the gift. This onus may not be easily discharged - with the result that all of the funds from the RRSP or RRIF will also form part of the estate of the deceased.
It is therefore, important to document the gift and the intention to make a gift as formally as possible.
The disgruntled children (who have not received any part of the "gifted" property) argue that the transferee holds the property received in trust for the estate of the transferor. They base their argument on the basis of the doctrine of the Presumption of Resulting Trust. In many of these transfers, the doctrine will apply and it will be up to the transferee to rebut the presumption by showing that there was clearly an intention to gift.
What often occurs, however, even if a gift were intended, is that there is insufficient evidence to prove the gift and rebut the presumption. As a result, the Courts may find that the transfered property is actually an asset of the estate of the transferor.
In order to ensure the ability to rebut the presumption of resulting trust, the gift should be properly documented. For instance, a deed of gift could and should be prepared,and executed, if indeed, it is the intention of the transferor to make a gift.
Being able to fully prove the gift could avoid long and acrimonius litigation and disharmony in the family.
What is even more worrisome from an estate planning perspective is that recent case law has found that the doctrine of the presumption of resulting trust, may also apply to the designation of benificiary designations for Registered Retirement Savings Plans (RRSPs) and Registered Retirement Income Funds (RRIFs). If this is the case then the donee (the designated beneficiary) will be put on the defensive and be required to prove the gift. This onus may not be easily discharged - with the result that all of the funds from the RRSP or RRIF will also form part of the estate of the deceased.
It is therefore, important to document the gift and the intention to make a gift as formally as possible.
posted by Robert at 4:58 PM
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