This Blog was written by: Alicia Mossington (Godin), Estate and Trust Consultant, Scotia Wealth Management 

There have been articles written over the years by my colleagues around gifting. Gifting can be a good estate planning strategy for many reasons. However, several recent cases highlight the importance of properly documenting intentions when an individual makes a gift, promise or an agreement regarding their property, particularly in the context of their estate plan. Adequate documentation may be in the form of a comprehensive Will or Power of Attorney, a promissory note, shareholders agreement or other written contract.

In Public Guardian and Trustee v Cherneyko[1] the court considered whether money transferred by an individual to her attorney for property would be upheld as a valid gift. This case also highlights some excellent “best-practices” attorneys should be aware of.

Jean and Kristina were neighbours. Jean was a 90-year old senior and had become dependent on her neighbour Kristina for daily support of her financial and personal affairs. In 2019, Jean appointed Kristina as her attorney for property and personal care, also preparing a new Will which made Kristina the estate trustee and residual beneficiary.[2]

Shortly after the Power of Attorney was granted, Kristina and Jean went to the bank, where Jean transferred $250,000.00 to Kristina and $195,000 to Jean’s niece, who lived in the United States. A few days later Jean was admitted to hospital and then a long-term care facility arranged by Kristina. After Jean’s move to long-term care, Kristina’s adult son moved into Jean’s home. The adult-son paid rent retroactively. In addition to the initial “gift”, from August 2019 to March 2020 approximately $71,000 in gifts and transfers were made by Jean to Kristina. Approximately $13,000.00 in withdrawals were made for “blended expenses” by Kristina, and an additional $13,000.00 in “unexplained” expenses.[3]

Among other questions, the Court was asked to find that the money transferred to Kristina was a gift. As the court summarized “an attorney for property is a fiduciary, whose powers and duties must be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person’s benefit.”

While the Substitute Decisions Act permits an attorney to make optional expenditures in certain circumstances, including gifts or loans to the person’s friends and relatives, or charitable gifts, there are a number of factors that should be considered, including the intentions of the person.[4]  In this case, the Court held that Kristina, acting as power of attorney, breached the duty of care she owed to Jean, ordering Kristina to pay back most of the funds she had received from Jean.[5]

In Jean’s case, the gifts had been given during her life. In Wenkoff v Wenkoff Estate the court considered whether the promise of a gift should be upheld after the death of the promisor.

Robert was a farmer, whose family farmed their homestead in Saskatchewan since 1911. Robert himself farmed the homestead for most of his life, until his death in 2018 at age 87.[6] Robert had five children with his first wife, and one child, a son named Bob, with his second wife.

Robert died without a Will. After his death, a dispute ensued regarding the farm. Robert’s son Bob claimed that his father had consistently told him that Bob should and would have the farm, to ensure that it would continue to be operated by a Wenkoff. Indeed, Bob had worked on the farm during his childhood, and then as an adult, moved back to the area to work full-time on the farm for several years prior to the death of his father.

In June of 2015 (three years before Robert’s death), Bob indicated a verbal agreement was reached with the following terms:

• Bob would purchase all of the land owned by Robert;
• Bob would purchase unspecified miscellaneous farm property owned by Robert;
• Robert would assign the Crown leases and surface rights to Bob; and
• Robert would retain ownership of the cattle land.

One year prior to Robert’s death, a lawyer was engaged to help father and son document the agreement and the assignment of some of the crown leases and surface rights began. However, Robert died before signing the agreement. Among other claims before the Court, the Chambers Judge was asked for a declaration that the alleged agreement was effective and enforceable, along with an order for specific performance.

The Chambers Judge found that “the acts relied on by Bob; Bob’s continued work [on the] land; Bob’s purchase of machinery; [and his] application in 2018 to purchase the Crown land were not unequivocally referable to the agreement and/or are equally consistent with the previous arrangement under which Bob took primary responsibility for the farm operation.”[7] It was noted that Robert was in ill health during this period of time, isolated, and completely reliant on Bob to complete his personal and financial obligations.

Ultimately, the Chambers Judge did not find a “true gift.” [8]

These two cases highlight the importance of documenting gifts, promises and intentions to ensure that client wishes are carried out.

 

[1] 2021 ONSC 107.

[2] Public Guardian and Trustee v Cherneyko 2021 ONSC 107.

[3] Ibid paras 51-53.

[4] Substitute Decisions Act, 1992. s. 37(3).

[5] supra note 1 at paras 55-57.

[6] Wenkoff v Wenkoff Estate (2021) SKCA 5 at para 7.

[7] Supra note 5 at para 22 citing the decision of the Chambers judge 2019 SKQB 325.

[8] Ibid at para 23, upheld on appeal by the Saskatchewan Court of Appeal.