1

In G.R.P. v L.B.P. (2013 NY Slip Op 51965 (U)) the judge notes what in some other contexts has been called a "presumption of advancement," i.e. that some types of monetary transfers between family members are presumed to be gifts under USA law (and some other legal codes).

The judge in the previous case notes that even a written document may not be sufficient to establish the existence of a loan for monetary transfers between family members, but may nonetheless be enforceable:

In this regard, the tax courts, while evaluating intra-family transactions, have repeatedly held that the existence of loan documents or a written debt instrument, security, or provision for payment of interest are not controlling. Van Anda v. Commissioner, 12 T.C. at 1162 (the giving of a note or other evidence of indebtedness which may be legally enforceable is not in itself conclusive of the existence of a bona fide debt). See also Wolff v. Commissioner, 26 B.T.A. 622 (1932). As one court noted, formal evidences of indebtedness are "at best clues to proof" of the ultimate fact.

Most of the case law around this seems to deal with monetary transfers.

My question is as follows: how do such presumptions apply to transfer of real or personal property, if at all? That is, if one person lends an object (from a smartphone to a lawnmower to a house) to a family member with the expectation that it be returned:

  • Does there exist a presumption of gifting in the first place that would need to be overcome to compel the return of the property?
  • And if so, can a written document or oral representation create an enforceable legal obligation, or even controlling legal evidence of the existence of a bona fide debt?
Obie 2.0
  • 692
  • 1
  • 4
  • 14

1 Answers1

3

Background

The presumption of advancement, where it applies, is a presumption that a gratuitous transfer of the legal interest is meant to also transfer the entire beneficial interest in the property to the recipient. Essentially a gift.

The presumption of advancement applies only in narrow kinds of relationships — traditionally relationships of dependency such as from a parent to a minor child, or (in the past, and possibly today in some jurisdictions) between spouses.

The contrary is that the gratuitous transfer creates a "resulting trust." Essentially, the transferor retains a beneficial interest in the property and can ultimately take the property back, or benefit from any sale.

The presumption of resulting trust is the presumption in most transfers, and the onus is on the person claiming a gift to prove the gift.

Rebutting the presumption of advancement

You rebut the presumption the same way you would establish any fact at issue in litigation: presenting relevant evidence.

  • This includes all acts and declarations by either party leading up to or part of the transfer.
  • However, after-the-fact statements or conduct can only be used against the person making them.
  • Evidence of illegality (such as an intention to temporarily transfer in order to avoid garnishment or seizure, for example) is not admissible to rebut a presumption of advancement.

See generally Ovans v. Ovans, 2006 ABQB 279, at para 30, drawing in long-established trust law.

Jen
  • 87,647
  • 5
  • 181
  • 381