Loan Forgiveness - Inter Vivos or Testamentary Gift?
In Singh Estate v. Shandil, 2007 BCCA 303, the testator had executed a 2003 Will and an accompanying Statutory Declaration (SD). The SD contained a clause forgiving a $100,000 loan to the testator’s daughter.
The testator’s relationship with his daughter subsequently soured. In 2004, he signed a document purporting to revoke the SD. He also swore a new Will which specifically instructed the executor to collect the loan. A demand was made for repayment. Shortly thereafter, the testator died and his estate commenced a claim for repayment.
At first instance, it was found that the daughter met the two required elements to establish a gift, namely, that the donor intended to make a gift, and that the donor delivered the gift. It was also found that the SD was irrevocable as there was no express power to revoke (an implied power won’t suffice). The estate trustee argued that because the 2003 Will was referenced in the SD, the SD was merely designed to explain the provisions of the 2003 Will, and was thereby a testamentary document. The judge did not accept this argument (I recommend reading the case to get a full flavour of the circumstances), and the trial decision was upheld by the British Columbia Court of Appeal.
So when your client intends to document his/her forgiveness of a loan made to a loved one, it might be worthwhile to consider including a revocation clause in the SD, or like document. That said, I wonder whether it is a viable option in practice. Perhaps waiting until your death (by forgiving a loan in your Will) is a simpler and better way to approach it.
Have a great weekend!Natalia Angelini
