When is a Gift not a Gift? When it's a Loan, Instead
When money is received from a bank, there’s usually no doubt that it’s a loan. However, in situations where property is being transferred between friends or family, it is not unusual for no written documentation to exist characterizing the nature of the transfer - and this is when disputes can arise. The recent decision in Colangelo v. Amore discusses the legal requirements for proving that property was received as a gift, not a loan.
In Colangelo v. Amore, the plaintiff and the defendant were in a relationship for a little over two years, during which time the plaintiff made transfers to the defendant totalling $16,000.00. There was no dispute that the money was advanced. The only issue was whether the advances constituted a loan or a gift.
The plaintiff argued that the funds were only advanced because the plaintiff was unemployed and couldn’t meet her monthly expenses. He stated that there was a clear understanding that the loan would be repaid when the defendant found a job.
The defendant argued that the funds had been offered by the plaintiff when she was unemployed – and after rejecting the offer a few times, she finally accepted out of financial desperation. Her evidence was that the money was advanced not as a loan but rather was a gift made because the plaintiff wanted to take care of her.
Justice Brown ruled that the amount constituted a loan not a gift and granted judgment to the plaintiff.
He found that when money is transferred in situations where the transferor is not indebted to the transferee and where no presumption of advancement exists, the burden falls to the transferee (in this case, the defendant) to establish the intention of a gift. The burden of proof required is the civil standard of “the balance of probabilities”.
In considering the circumstances that existed when the funds were advanced, Brown J. determined that the defendant could not provide sufficient evidence that the plaintiff had intended a gift. He noted that it was not enough for the defendant to believe she was receiving a gift, the plaintiff also had to intend to make one.
This decision underscores the importance of anyone receiving funds to ensure that if the money is not to be repaid, this is documented sufficiently so problems do not arise down the road.
Comments (1)
Read through and enter the discussion by using the form at the endAngela H. - October 15, 2011 5:50 PM
this can also be problematic when money is given within a family and especially between in-laws. If I gave my sister money to settle up on money she loaned to me, that is not a loan. But then, my ex wife will claim that since we were married at the time, any money I gave constituted joint funds..Yet, it was not a loan and was never agreed to as such.
Now, my ex is bothering my sister for the money he says he loaned to her. My lawyer says there is no foundation.
The money given was drawn on our joint account, to which I contributed every much as my ex did. And, I signed the check I gave to my sister, my ex had nothing to do with it. I know it was not a loan. My sister knows it was not a loan. My ex is just trying to cause trouble.
There was no verbal agreement, no promise to pay anything back. My ex didn't even know where the money went until recently. Now that we're divorced, my ex is trying to get something from my sister.
It as not a loan.
BLAHHH