This Blog was written by: Alicia Godin, Estate and Trust Consultant, Scotiatrust

“A jealous son sues his desirous and spoiled younger brother and his beleaguered and over-his-head uncle about the spoils of the estate of his late mother.”

Working in the area of estate planning and estate administration offers a glimpse into the range of family dynamics and human behaviour. As an estate planner, much of my time spent with clients centers around discussions of their family situation and the ability of family members to get along (or not) after the client has passed on. Many clients’ views regarding estate planning and administration are shaped by their own experiences after having lost a loved one. Indeed I have had situations where I have met with clients, who were confident that their children would be capable of working together to settle the estate, only to then meet with the children after the client’s passing and discover that this could not be further from the truth.

The excerpt above is the opening line of a recent decision of the Ontario Superior Court[1], where the court was called upon to deal with a longstanding feud between family members after the death of the matriarch, Nadia. Nadia had two children Bryan and Taras, whose relationship was strained for many years prior to her death. Bryan believed that he was not nurtured by his mother, and in his teenage years suffered from an obsessive compulsive disorder, which he blamed on Nadia’s inattentiveness. Nevertheless, he went to university, began a career, travelled and had no contact with his family for approximately 15 years. When Bryan resumed contact with the family he was displeased with the level of support Nadia offered Taras, his younger brother. Nadia and Taras appeared to have a very close relationship, and Nadia was very generous to Taras, providing significant financial support. Nadia paid most, if not all of his living expenses, gave him and paid for a credit card, co-signed loans, and helped Taras run various (albeit failed) businesses.

When Nadia’s health severely declined, Taras and his uncle Ned, took over managing Nadia’s finances, and Taras continued to fund his lifestyle expenses during her illness. After her death, Bryan challenged the gifts and expenses given by Nadia to Taras, seeking among other things, that the estate be equalized. After more than 6 years of litigation, Mr. Justice Perell found that Bryan’s “malicious envy of his brother’s favoured position [blinded him] to the truth, (….)”, and although Taras was financially dependent on Nadia, she had indulged him for decades.

In a similar situation, a mother, whose health was failing, wanted to recognize the support and ongoing care her youngest daughter had provided. Unbeknownst to the rest of the family, mom transferred the family cottage to her daughter. The transfer came to light after mom’s death, and almost 15 years later, the cottage was worth more than 10 times its original value. The transfer of the cottage was considered by mom to be a gift, and was not taken into account in the division of the estate causing the other siblings to feel cheated and overlooked.

It is easy to appreciate that clients often want to “gift first and ask questions later”, but making significant gifts to loved ones often has unintended consequences after death. Instead of simply giving away assets, it is often prudent to review both the tax and family implications of making the gift. If after running through the drawbacks, a client still wants to give away assets, consideration should be given to documenting the gift and the intention behind it. This will avoid future arguments that “Mom (or Dad) didn’t really want to give that to you, therefore it should be brought back into the estate.”

Gifting can be an attractive estate planning strategy, if planned for and implemented in a thoughtful and informed manner.

[1] Fica v Dmytrychyn, 2018 ONSC 2034.