Property or Money Transfer Litigation
Individuals loan, gift or transfer small to large sums of money, assets or property to friends, partners, girlfriends, boyfriends, fiancés, family or relatives for various reasons, including:
- Loan or Gift for a home or asset purchase
- Loan or Gift to fund business operations
- Loan or Gift for investment purposes
- Loan or Gift to repay debt
- Loan or Gift for education
- Loan or Gift for Tax Planning or Tax Avoidance, or Estate Planning
- Loan or Gift to purchase, maintain, repair or renovate property
These loans, gifts or transfers can often be made without legal advice. The parties may or may not prepare documents which describe the transfer as a gift or a loan. Documents which are prepared may or may not reflect the true intentions of the parties.
At the time of the transfer, the correct description of the transaction may seem unimportant. The parties’ relationship may be close and there may be no discussion of whether the money needs to be repaid or not.
But what happens when the person who transferred the money wants the money back? Disputes about such transfers and whether they were a gift or a loan often arise during or after marriage breakdowns, family feuds, soured friendships, and estate disputes.
Legal Advice will be needed to determine if the transfer was a gift or a loan, and it may be necessary to seek a resolution of the dispute by a Negotiations, Mediation, Arbitration or from the Court.
Gift vs. Loan
A gift is a transfer in which the transferor does not expect to be repaid. The intention to make a gift tends to be reflected in emails, correspondence or other documents, or perhaps by the absence of evidence of security, records, repayments or timely efforts to collect repayments.
A loan often involves a formal, recorded transfer in which terms are set out and in which repayment is made or sought, but can also be reflected in emails, correspondence or other documents, and by the existence of security, records, repayments or by evidence of timely efforts to collect repayments.
Factors to Consider
The onus of proof to establish a valid gift rests on the recipient. The onus of proof to establish a valid loan rests with the lender.
Dispute resolution by lawyers, mediators, arbitrators or the Court will require the consideration of a number of factors to determine whether the transfer of money, assets or property was intended to be a gift or a loan, including:
- The nature of the relationship between the parties
- The size of the gift as measured against the totality of the donor’s property
- The importance of the gifted item in relation to the totality
- Whether there were any contemporaneous documents evidencing a loan
- Whether the manner for repayment is specified
- Whether there is security held for the loan
- Where there has been any demand for payment before the separation of the parties (in the context of a matrimonial dispute)
- Whether there has been any partial repayment
- Whether there was an expectation or likelihood of repayment
Family Law Considerations
Disputes over gifts and loans frequently arise in family law. The distinction over gifts versus loans have important implications in the equalization of net family property. A spouse who received a loan should list the loan as a debt on their net family property calculation, and this affects the equalization payment. The loan would need to be repaid before any property is divided.
By contrast, if a spouse receives a gift during the marriage, the gift would be excluded from the net family property calculation. However, gifts need to be traced to be excluded. If a spouse uses a monetary gift to purchase a matrimonial home or other family asset, it is not excluded from the net family property calculation.
Dispute resolution by lawyers, mediators, arbitrators or the Court may be assisted by certain presumptions, being:
- Presumption of resulting trust: gratuitous transfers to a non-family member may be presumed to be held in trust by the recipient by the non-family member. The law presumes that parties intended a bargain, not to make a gift
This presumption may also apply to gratuitous transfers by parents to adult children are presumed to be held in trust by the child for the parent in a resulting trust
- Presumption of advancement: gratuitous transfers by a parent to a minor child may be presumed to be a gift
These presumptions may be most important where evidence of the parties’ intentions is lacking. The presumptions may be rebutted by evidence of the parties’ intentions.
Experienced Litigation Lawyers
Gilbertson Davis LLP can serve your needs with lawyers who have experience in acting for clients bringing and defending claims based on allegations of both gifts and loans. Please contact us for an initial consultation.