Parent to child transfers: gift or resulting trust?

Changing the rules for purchase money resulting trusts

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2 Changing the rules for purchase money resulting trusts

The Canadian approach is not the only way to achieve a greater degree of consistency between land and purchase money transactions. Consistency could be achieved by legislating to remove the presumption of trust for provision of purchase price cases; in effect introducing the opposite rule from the one adopted in Canada.

The presumption of resulting trust currently applies to all situations of provision of purchase price, unless the presumption of advancement applies. The change would result in transactions which are currently regarded as presumptive trusts becoming presumptive gifts. To achieve maximum certainty, the rules for voluntary transfers of land would also need to be rendered consistent, with a clear removal of the presumption of trust in all jurisdictions.

The change would create substantial consistency with voluntary transfer situations, and would remove a layer of presumed intention. A consequence of the change would be that as a gift is presumed, there would be no need for family members to rely on the presumption of advancement. It will become irrelevant.

The change would notionally have a broad impact, as it would affect cases where one party pays more than their share of the purchase price for an asset, but that contribution is not reflected in their legal title to the asset. There is however, little indication in the cases that this type of transaction occurs outside the family context. Thus, it can be expected that the main effect of the change would be increased consistency in family transactions.

This proposal would substantially remove the inconsistencies between voluntary transfer and purchase price transactions, but some disparity may remain. The problem would be as follows:

This proposal is only that the presumption of resulting trust be removed. It is not suggested that the presumption of gift is irrebuttable. Evidence of contrary intention should be available so that a provider of purchase price who asserted their beneficial ownership by virtue of such payment would be allowed to prove that they did not intend a gift of the funds. The plaintiff would be able to prove that a resulting trust arose on the facts, due to her lack of donative intention.

However, as discussed above, current interpretation of the provisions governing voluntary transfers excludes the availability of evidence to demonstrate actual intention to retain beneficial ownership.

This continued inconsistency is problematic.

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