Years ago, it was not uncommon for parents to transfer title to their homes into their (Adult) childrens’ names. There was a time when the transfer costs were relatively low and there were no significant tax concerns, if at all. Such transfers also reduced the likelihood of having to take a parent’s Will to Probate, which also saved money.
Rules have, however, changed dramatically, particularly in the last decade. Today it is considerably more expensive to complete a transfer and more documents are required as well. Such important a step requires prudence. In my opinion, the turning point in this area of law, that caused the simple to become complex, was back in 2007, when the Supreme Court of Canada decided a case called Pecore vs. Pecore.
The Court in that case decided, essentially, that if a parent transfers title to their property (whether land or even a Bank account) to a child, the old legal presumption of advancement no longer applies. The person receiving the property has to show that their parent(s) intended a gift. If the child did not pay anything for the property (which is usual), the legal presumption is that the child holds the property in Trust for her or his parents and, if the parents die, the property reverts back to the parent’s Estate. The onus is on the child, then, to show that the transfer was a gift.
Last month, reasons for judgment were released in a B.C. Supreme Court case called Sandu v. Sandu. This case seems to be one where “it all went wrong” and the effort to prove that a gift was intended, fell short. But the case has further implications as well and it is worth looking at.
The parents in this case were a long married couple, from India. They did not have a strong grasp of the English language and they depended on some of their children to assist them when having to deal with documents or otherwise something official. They had six children, two of whom were apparently estranged.
Their youngest child, who helped them on a day to day basis, received title to the parents’ house (their main Asset) in 2016. The (adult) child did not pay any money for the property.
After receiving the title, the child granted a mortgage over the property, using the funds obtained to purchase a property of his own.
Some time after, the transfer was disclosed to another of the parents’ children. That child discussed the matter with the parents and they decided to commence this action, with the eldest child as their litigation guardian (again, the parents did not have a good command over the English language).
The Court’s decision
The youngest child had been looking after day to day financial affairs of the
parents. That included paying bills, dealing with taxes, pension and insurance issues. When title was actually transferred, none of the other family members were informed. The eldest child was never informed as to any Estate planning the parents sought to do either (which included two Wills the parents made). It appears that the youngest child, who was looking after his parents’ financial affairs, disclosed the transfer in 2021 to the eldest child.
The parents had no documents in connection with the transfer. It is not clear that a Deed of Gift was made by the parents either, though they did have legal advice.
In its reasons, the Court carefully considered the (legal) issue of Undue Influence. The circumstances were appropriate for that issue to arise. The Court held that a presumption of Undue Influence arose because of the relationship the parents had with their youngest child and the belief the Court had that the parents were vulnerable.
The Court considered the fact that the youngest child was the primary beneficiary under the parents’ Wills, as well as the person who organized the visits to Lawyers’ offices to make the Wills. The child also organized the title transfer with a law firm.
The child was unable to rebut the presumption of Undue Influence and the Court held that there was undue influence on the parents. The Court decided that the transfer was void and so title had to return to the parents.
This case raises concerns beyond the decision itself. Certainly, the Court made the correct decision here, in my opinion. The Court’s analysis was thorough. However, the Court’s finding of the vulnerability of the parents rings strong across the country. We hear often of parents being taken advantage of by children (and other persons) and the difficulties encountered in dealing with it in many cases. In this case, perhaps it was fortunate that the transfer of the title was discovered while the parents were alive. Had they been deceased, it probably would have been much more difficult for the other children to decide what steps to take and even whether to take them.
Sometimes, these kinds of discoveries are made by accident. It is therefore useful for children in a family to make sure, as their parents age, not only that their financial affairs are properly managed, but that the management itself is carried out fully and responsibly. This case stands, then, also as a warning to families.
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