Is it a Gift or a Loan?
The issue of whether a transfer is a gift or a loan arises frequently in estate litigation. It was one that was addressed in Justice Lauwers’ recent decision in Church v. Church. While the character of the litigation was a gift vs. loan dispute, the decision in question resulted from a motion for summary judgment brought by the plaintiffs.
By way of background, the parties were all relatives – the defendants were the daughter-in-law and grandson of the plaintiffs. The plaintiffs advanced funds to the defendants to purchase a new home. As is quite common involving advances between family members, no written agreement existed characterizing the nature of the advance.
A dispute later arose as to whether the funds advanced to purchase the home were a gift or a loan and the plaintiffs commenced an action claiming the property was held on a resulting trust for their benefit. They then proceeded to bring a motion for summary judgment (arguing there was no genuine issue for trial and that they were entitled to judgment).
In order to conclude that an advance was a gift, the court must find that there was an intention to donate by the donor; an act of delivery; and an acceptance by the donee. Here, the dispute was over whether there was an intention to donate. Since the grandson who received the funds was over 18, there was a legal presumption that he held the funds on a resulting trust that he was required to rebut in order to prove a gift (although, on the motion for summary judgment, the onus was on the plaintiffs to, at first instance, establish that there was no genuine issue for trial).
While there was no formal agreement setting out the terms of the advance, after the funds had been transferred there were numerous emails between the plaintiffs and defendants discussing the terms of the repayment of the funds. Lauwers J. found that after the transfer of funds, the defendants had behaved as though they were indebted to the plaintiffs. Additionally, he found that the defendants could produce no evidence to support their contention that the funds had been gifted. Accordingly, he granted the plaintiff’s motion for summary judgment.