Thinking About Avoiding Probate Tax by Transferring the House to Your Children? Think Again!

While there is no inheritance tax in Canada, what is normally referred to as the estate tax is the estate administration tax, also known as the probate tax, which varies from province to province. For example, in Ontario, it is calculated at the rate of 1.5% on the total value of the estate, applicable to all estates above $50,000 in value. On the other hand, in Manitoba, there is no probate tax at all. If you are worried about the burden of probate tax on your heirs, you need to consult an experienced Wills and Estates lawyer on estate planning.

Balkisson v. Sandy, 2025 ONSC 856

Consider the recent decision of the Ontario Superior Court of Justice in Balkisson v. Sandy, 2025 ONSC 856. The applicant, Veronica Balkisson, wished to avoid probate tax by registering a property in her son’s name. Later, once the relationship between the family members had soured, she tried to reverse her decision by taking her son and his wife to court to restore her ownership of the property.

What is the background of the case?

Ms. Balkisson wanted to use the proceeds of sale from her earlier property to purchase a house at Lambeth Street in Brampton, with the intention of passing it on to two of her children, Stefan and Heaven, as their inheritance. Seeking to avoid the probate tax on the property, she decided to have the property registered in her children’s names, but since Heaven was a minor at that time, the property was registered in Stefan’s name only, with the understanding that Heaven would receive her share of the property once she turned eighteen.

On Ms. Balkisson’s telling, because the purchase price of the property at Lambeth was $905,000, this corresponded to a $420,000 interest in the property for both Stefan and Heaven, coming to a total of $840,000. The beneficiaries were expected to repay the remaining $65,000 of the purchase price to the applicant during her lifetime. Veronica had noted down all these inheritances in a handwritten will.

Soon after the purchase, the beneficiaries, Stefan and Heaven, Stefan’s wife Andrea, and their children, moved into the house. The relations between Andrea and Veronica started deteriorating soon after this. After a scuffle broke out between Veronica and Adrea on May 23, 2024, Veronica was no longer allowed to visit the house or meet her grandchildren. This prompted the applicant to change her will and divide her estate equally among all her children. She informed Stefan that he must transfer the Lambeth property back to her. She argued that it was not a gift but a resulting trust and that he had failed in his duties as a trustee and must transfer the property back to her.

The respondents, Stefan and Andrea, argued that the transfer of the property to Stefan was never intended as a resulting trust but as an irreversible gift. The only stipulation was that Stefan must transfer 50% of the ownership to Heaven once she turned eighteen. The respondents had plenty of evidence in the form of messages between Stefan and Veronica to prove their point.

Why did the court rule in favour of the respondents?

With the chain of messages clearly establishing the intention of Veronica to purchase the property as a gift for Stefan and Heaven, and her change of mind after the fight with Andrea, the court ultimately ruled in favour of the respondents, Stefan and Andrea. The court made the following observations in its judgment.

• The applicant clearly referred to the house as a gift repeatedly in her text messages to Stefan.
• The communication Veronica had with Stefan clearly shows that “she wanted to change things” after her fight with Andrea.
• Veronica had made the payment of $840,000 on behalf of Stefan and Heaven, clearly as a gift since there was no expectation of repayment of this amount. Instead, the repayment was only applicable to the remaining $65,000.
• The applicant referred to the proceeds from the Wheatley sale as her children’s inheritance in her communication with Stefan.
• It was evident that the applicant had no intention of living at the Lambeth property. Her decision to move her furniture from storage to Lambeth was to save money on storage fees.
• The applicant did not have a bedroom at the Lambeth property. The bedrooms at the property were for Stefan and Heaven’s families alone.
• The text messages also show that there was a clear plan by Heaven and Stefan to sell the property after a few years and split the proceeds equally between them. This was supposed to serve as the funding for the purchase of their own separate houses later on.
• There is evidence in the text messages to show that the applicant had referred to Heaven as Stefan’s halfway partner.
• In the text messages between Heaven and Steven, Heaven repeatedly referred to her 50% ownership of the property. Her current position in support of her mother that the property was never intended as a gift, therefore, lacked credibility.
• The court disagreed with the argument that $420,000 each paid on behalf of Stefan and Heaven was just a budget.
• The court also observed that a legally valid gift, once made, cannot be revoked.

In summary, the court agreed with Stefan and Andrea that the house was indeed a gift and not a resulting trust as Veronica claimed. The court further noted that the evidence clearly showed that the applicant changed her mind about the gift after she had a serious breakdown of relations with her son, especially after the altercation she had with her daughter-in-law. The court observed that the applicant cannot legally undo the gift already transferred to the respondent.

What are the key takeaways from this case?

• Gifts are irrevocable: Once a gift has been granted to a family member, it is not possible to take it back because of a disagreement or quarrel.
• Everything should be documented and signed into a legally binding agreement between the parties.
• Registering property entirely in the name of your children or jointly with them might not be the best way to avoid probate fees.
• Explore legal avenues to protect the property interests of minors. If you cannot register the property in the name of the minor, then establishing a trust in their name might be an option.
• Do proper estate planning by consulting a Wills and Estates lawyer to avoid possible family conflicts and confusion later on.

In such cases, it is always best to rely on an experienced Wills and Estates lawyer to advise you on your legal options.