Inter vivos gifts are gifts made by a person during his or her lifetime, as opposed to leaving gifts in a Will (inter vivos is Latin for “between the living”). Inter vivos gifts are sometimes disputed, with the allegation being the gift giver was “unduly influenced” by the recipient of the gift – often a family member, friend or caregiver. Under certain circumstances, there is a presumption the inter vivos gift was a result of undue influence.
When is there a presumption of Undue Influence?
In Goodman Estate v. Geffen (1991), the Supreme Court of Canada answered the question of what a plaintiff must establish in order to trigger a presumption of undue influence. Justice Wilson explained the first step is to examine the relationship between the donor and the recipient, and whether the “potential for domination inheres in the nature of the relationship itself” (para 43). The Court confirmed there are certain relationships, such as parent and child, which are recognized as supporting the presumption.
The next step is examining the nature of the transaction. In the case of gifts (as opposed to commercial transactions), it is enough for the plaintiff to establish the presence of a dominant relationship (para 45).
Recently the Ontario Court of Appeal clarified in Morreale v. Romanino, (2017) “while the test embraces relationships that have been recognized as giving rise to the presumption, it is not enough to simply show that such a relationship exists. Even for such relationships, the presumption does not arise unless it has been established that there is the potential for one person to dominate the will of another.” The trial judge must “consider the whole of the relationship between the parties to see if there is the potential for domination rather than looking for a specific act of coercion or domination.” (para 23)
What happens once the Presumption is established?
Once the plaintiff has triggered the presumption of undue influence, the recipient of the gift “must establish on a balance of probabilities that the gift was the result of the transferor’s “full, free and informed thought” (para 46).
In order to do so, the recipient must present corroborating evidence, which “can be direct or circumstantial, and it can consist of a single piece or evidence or several pieces considered cumulatively” (Foley v. McIntyre, 2015) but evidence that the transferor received qualified, independent advice can be used to rebut the presumption.
What the cases are telling us, is that if you or someone you know is considering making a gift in his or her lifetime, they should obtain legal advice and clearly and substantively document your intention.