Presumption of advancement - gifts to adult children
Background
In Re Levy [1960] Ch. 346 it was explained that this “is based on the concept that where a property is transferred to a person to whom the transferor has an obligation to support, it is presumed to be an advance of the interest the dependent might reasonably expect to receive on the death of the transferor”. The presumption of advancement can be rebutted relatively easily by documentary evidence that no gift was intended.
In Canada, the Supreme Court held in Pecore v. Pecore, 2007 SCC 17 that the presumption should not apply in respect of independent adult children. The court commented that parental support obligations in law usually end when the child ceases to be a minor, and indeed in later life the adult child may have imposed upon them the obligation to support their parents. The presumption of advancement with regard to gratuitous transfers from parent to child was limited to transfers by parents to minor children.
Kent v Kent
The recent case of Kent v. Kent, 2020 ONCA 390 (CanLII) determined that a transfer from mother to daughter raised the presumption of a resulting trust in a situation where there was lack of consideration.
The facts were as follows. A mother (M) bought a property as sole purchaser in 1983. In 1996 she transferred title to herself and J, her adult daughter, as joint tenants for nominal consideration. M continued to live alone at the property until 2008, when J, her husband, G, and their children moved in. The family lived with M at the property until J’s death in 2014 on a rent-free basis. G was the sole beneficiary of J’s estate. After J died, G continued to live with M at the property on a rent-free basis. M moved into long-term care in 2015 but continued to pay all the expenses for the property until she died in 2016.
M had made a 1978 will naming J as the sole beneficiary. If J predeceased M, J’s living children would be the beneficiaries. In 2015, M made a new will naming J and G’s children as trustees and leaving the property to G and her two grandchildren in equal parts (one third each). After J died, M had registered a survivorship application putting the title of the property solely into her name.
On M’s death, G claimed that he was entitled to half of the property as the sole beneficiary under J’s will, and a further third of the remaining half under M’s will. He claimed that his children were each only entitled to one sixth. His children maintained that they each were entitled to one third of the property.
It was held that the 1996 transfer of title was not a gift. Pecore was applied and there was a presumption of a resulting trust. M’s 1978 will did not rebut the presumption of a resulting trust. It was made two decades before the 1996 transfer and it served as no evidence of M’s intention in 1996. M’s actions in making a new will in 2015 and transferring the property back into her name after J died by way of survivorship application was evidence that she believed she was the sole owner of the property and not evidence of a change of intention.
G had further argued that when he and J moved in to the property it became a “matrimonial home” under the Family Law Act (R.S.O. 1990, c. F.3) in Ontario. This would mean that the joint tenancy would have been deemed severed immediately before J’s death and her half would devolve to G. He claimed this rebutted the presumption of a resulting trust. However, the court did not accept G’s submission. G and J did occupy the property as their family residence beginning in 2008; however, J did not have the requisite “interest” in the property in order to qualify it as a matrimonial home. The transfer for nominal consideration raised the presumption of resulting trust instead.
Presumption of advancement in the English courts
Conversely, under English law, the courts have been more willing to uphold the presumption of advancement.
In Wood v Watkin [2019] EWHC 1311 (Ch) the High Court held that a presumption of advancement could arise even where the donee was an adult child of the donor and financially independent of their parent.
Moreover, in Kelly v Kelly [2020] 3 WLUK 94, the High Court held that the presumption of advancement was not rebutted where there was no documentary evidence that a father's purchase of a property for his son was a loan and not a gift. The father was held to have given inconsistent evidence and there was no mention of a loan in any of the documents exchanged between father and son. Although there were witnesses who gave consistent evidence of their honest understanding that the purchase was a loan, that was after the fact. While the presumption of advancement is considered to be weak and easily rebutted, the lack of documentary evidence meant that it could not be rebutted in this case.
The presumption of advancement may be abolished altogether in England and Wales if section 199 of the Equality Act 2010 is brought into force. However there is no sign of this happening at the moment.
Conclusion
What these cases highlight is the need to ensure that the intention behind any transfer of property within a family is accurately recorded at the time as it is difficult to predict whether the presumption of advancement will be applied in any given case. A clear statement of intention will avoid expensive litigation and will prevent property ending up with the wrong person.
The authors would like to thank trainee solicitor Carrie Gothard for her contribution to this article.
