goodintentions
MortgageBroker mbabc.ca spring 2014 | 39
Capacity to Gift
ImagIne thIs scenarIo: A client,
as requested by the mortgage broker, shows
up with a signed gi letter in the amount
of $150,000. Together with the expected
proceeds from the pending mortgage, the
gied funds will be enough to pay for the
client's real estate purchase.
Assuming the gi letter is otherwise in
order, should the prudent mortgage broker be
at all concerned about the mental capacity of
the contributor of the gi? Even though the
gi letter appears otherwise valid, is it possible
that it is invalid because the contributor lacks
sufficient mental capacity to form the intention
to make the gi?
Intention to make a gift
For a gi to be valid, the contributor must
have intended to make the gi (Nishi v. Rascal
Trucking Ltd. 2013 SCC 33; Kerr v. Baranow
2011 SCC 10; and Pecore v. Pecore 2007 SCC
17). It is the actual intention of the contributor
which is the governing consideration, and the
actual intention is determined by:
• Starting with the appropriate presumption;
either:
a. e property is transferred between a
parent and their dependent child so a
gi is presumed to have been intended; or
b. e property is transferred other than
between a parent and their dependent child
so a loan or an investment, rather than a
gi, is presumed to have been intended;
• en reviewing any evidence rebutting the
presumed intention to determine if it is
more likely than not (i.e., on the balance
of probabilities) that the actual intention is
contrary to the presumed intention.
Lack of mental capacity
In the absence of sufficient mental capacity, the
contributor cannot form the intention to make a
gi. e level of capacity needed is the capacity to
understand substantially the nature and effect of
the transaction (Royal Trust Co. v. Diamant, (1953)
3 D.L.R. 102 (B.C.S.C.) at 111, per Whittaker J.).
e prudent mortgage broker should be concerned about the mental capacity
of the contributor of the gi
By Ray Basi
•
p38-43_Gifting.indd 39 14-05-08 2:27 PM
