Lifetime Wealth Transfers and the Equitable Presumptions of Resulting Trust and Gift

• Author: Jamie Glister
• Position: Associate Professor, The University of Sydney Law School
• Pages: 1971-1995

1971

Lifetime Wealth Transfers and the

Equitable Presumptions of Resulting Trust

and Gift

Jamie Glister*

ABSTRACT: Wealth transfer between generations is not confined to

testamentary dispositions. It can also involve straightfor ward transfers of

property from living parents to their ch ildren and purchases by living parents

of property then placed into thei r children’s names. Legal title t o the property

will be in the child, but the child m ight hold the property on trust for the

parent. It is here that the equitab le presumptions of resulting trust and gift

operate.

This Article identifies and interrog ates differences in the modern operation of

these equitable presumptions between the United Sta tes and certain

Commonwealth jurisdictions. T he analysis includes: whether or not the

presumptions apply to voluntary conveyances of property; the unde rlying

rationale of the presumption of gift th at applies in favor of spouses, children,

and other natural objects of bou nty; the relationships in respect of which that

presumption applies; the type and timing of ev idence used to rebut that

presumption; and the nature of the tru st (express or resulting) that arises on

rebuttal. The article shows that the United States and the Commonwealth

jurisdictions now employ these presump tions in significantly different ways.

I. INTRO DUCTION ......................................................................... 1972

II. RESULTING TRUSTS ................................................................... 1973

III. PRESUMPTION OF RESULTING TRUST ........................................ 1974

A. WHEN THE PRESUMPTION DOES NOT APPLY .......................... 1976

B. PROVED RESULTING TRUSTS ................................................. 1977

C. CONSTRUCTIVE TRUSTS ........................................................ 1978

* Associate Professor, The Uni versity of Sydney Law School. I thank all at the symposium,

and particularly Thomas G allanis, for their helpful comments and for a very stimulating day.

I also thank the editors o f the Iowa Law Review for their help in preparing this Article for

publication.

1972 IOWA LAW REVIEW [Vol. 103:1971

IV. PRESUMPTION OF GIFT .............................................................. 1979

A. STRUCTURE OF THE PRESUMPTIONS OF RESULTING

TRUST AND GIFT ................................................................. 1979

B. APPLICATION OF PRESUMPTION OF GIFT ................................ 1982

C. REBUTTAL OF PRESUMPTION OF GIFT .................................... 1984

D. PRESUMPTIONS OF GIFT WITHOUT PRESUMPTIONS OF

RESULTING TRUST ............................................................... 1985

E. WEIGHT OF PRESUMPTION OF GIFT........................................ 1987

F. RATIONALE OF PRESUMPTION OF GIFT ................................... 1991

V. CONCLUSION ............................................................................ 1994

I. INTRODUCTION

Intergenerational wealth transfers do not only take place upon death.

Today, it is very common to buy a house with an advance from the Bank of

Mom and Dad—the Prime Minister of Australia even encourages parents to

“shell out for their kids” in this way.1 But is that advance a loan or a gift? What

if it comes from the Bank of Grandma and Grandad? What if the family later

has a falling out?

From the perspective of property law, there is a simple answer to these

questions: Assuming compliance with formal requirements, the location of

property rights depends on the intentions of the parties involved at the time

the transfer took place. 2 Similarly, the parties themselves determine whether

a transfer of property is an outright gift or is accompanied by an obligation to

repay. The answer to any subsequent dispute should therefore be found in a

careful examination of what the parties intended. But this can be a difficult

task in practice. The dispute may arise many years after the relevant transfer,

when memories may have faded, some parties may have died, intra-family

arrangements may not have been well-documented, and proper legal advice

may not have been sought.3

1. Latika Bourke, Malcolm Turnbull Defends Saying Wealthy Parents Should ‘Shell Out’ to Buy

Their Kid a House, SYDNEY MORN ING HERALD (May 5, 2016), http://www.smh.com.au/federal-

politics/political-news/malcolm-turnbull-defends-saying-wealthy -parents-should-shell-out-to-buy-

their-kid-a-house-20160504-goml 5z.html.

2. It chiefly depends on the objecti vely manifested intention of the transfe ror, but the

intention of the recipient is also impo rtant. A recipient cannot, for example, be forced to accept

a transfer of property he or she does not want. In In re Kresge, a recipient son who was unaware of

a transfer of land into his name unsuccessfully argued that he held on resulting trust. In re Kresge,

467 B.R. 776, 781–82 (Bankr. M.D. Pa. 2012). He cou ld, however, reject legal titl e to the

property. See generally Jonathan Hill, The Role of the Donee’s Consent in the Law of Gift, 117 LAW Q.

REV. 127 (2001).

3. See, e.g., In re A Policy No. 6402 of the Scotti sh Equitable Life Assurance Society [1902]

1 Ch 282 at 282–83 (Eng.) (disputing property dealings that took place 50 years previously, with