WHAT HAPPENS TO “GIFTS” WHEN DIVORCED
According to the Black Law’s dictionary, a gift is a voluntary transfer of personal property without consideration. Generally, gifts from a third party or property acquired by either party by inheritance are not matrimonial property. However, if the gift has changed form, it can be considered part of the matrimonial property. For example, if a person received an antique watch and he/she sells it, the gift has changed form; hence it can be considered matrimonial property. At separation or divorce, a party must show that the gift is still in existence at separation. Gifts may be excluded from a spouse’s net family property if they were received from a third party at the date of marriage; the giver must have intended that the gift be given to one spouse instead of the whole family. Any proceeds from the sale of such gift are excluded from the matrimonial property, and it qualifies as excluded property.
Section 10(1) of the Divorce Act authorizes a court to establish the questions of title between the spouses. This includes considering whether legal title actually reflects beneficial ownership. Also, Section 14 of the Act affirms the presumption of a resulting trust in determining questions of ownership between spouses in the context of gratuitous property transfers. Where the presumption is invoked, the party resisting the imposition of a resulting trust is required to disprove the presumption that her or his spouse is the beneficial owner of an interest in the disputed property.
In Kerr v. Baranow 2011 1. S.C.R 269, the Supreme Court held that the transferor’s actual intention is taken into consideration. Also, in Schwartz v Schwartz 2012 ONCA 329 290 O.A.C, the parties’ intention to make a voluntary and gratuitous transfer is an essential ingredient of a legally valid gift. In Korman v Korman 2015 ONCA 578, 2015 CarswellOnt 12612, the husband transferred his interest in Matrimonial Home by allowing his wife to register the Matrimonial Home in her name. The couple later divorce; at the divorce proceedings, the wife testified that the matrimonial home was registered in her name to protect the husband from creditors because of the nature of his employment. Nonetheless, the husband had a full interest in the Matrimonial Home. The judge of the Court of Appeal held that the trial court judge erred in his finding that the husband unconditionally gifted his interest in the Matrimonial Home to his wife and subsequently denying him a proprietary interest in the property. The judge of the Court of Appeal held that the presumption of the resulting trust should be considered; hence the husband has a proprietary interest in the Matrimonial home because he intended to secure the Matrimonial Home and not to gift his wife unconditionally.
Another case in point is that of Cartier v. Cartier (2007) 47 RFL (6th) 436, 2007 CarswellOnt 7869 (OntSCJ), whereby the husband transferred an entire farm property gifted to him by his mother so that the property would be owned jointly by him and his wife. At separation, the husband claimed that he had an interest in the proceedings from the property’s sale. In this case, the Judge held that when a spouse transfers inherited or gifted property into spouses’ joint names, the spouse who transfers the property loses the exclusion only to the extent of the gift, provided that the transferor intended joint ownership. In Wolfe v. Wolfe, 43 RFL (5th) 223, CarswellOnt 3192, the court held that by the virtue that the husband transferred property he had inherited from his father and he applied it in his matrimonial home. The exclusion rule ceased to apply, and the property can be considered matrimonial property.
In conclusion, gifts and inheritances are excluded from a spouse’s net family property if they are received from a third party, and the third party intends the gift to be used by the spouse to exclude the whole family. However, if the receiving spouse does not apply the exclusion rule, it can be considered part of matrimonial property.
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