What Happens If You’re Given a Cheque, But The Person Who Wrote It Dies Before The Cheque Is Cashed?

Written on behalf of Arbesman Hamilton LLP

It’s not every day that one might receive a gift of $100,000. What’s more rare would be if the person who wrote the cheque died before it could be cashed. Would the recipient of the gift still be entitled to it in such a case? This is a question the Court of Appeal for Ontario recently grappled with.

A reward for neighbourly behaviour

The appellant was a neighbor to the deceased. For nearly 15 years he helped her with household maintenance and chores, such as driving her to the bank or for groceries. Shortly before the deceased passed away, she told the appellant that she had made a bequest in her will to leave him $100,000. At the same time, she handed him a cheque for $100,000 and told him he should take it to the bank the following day.

The appellant took the cheque to the bank the next day, only to be told that the balance in the account was only $81,732.75, which would not cover the amount of the cheque. The deceased also had over $200,000 in other accounts at the branch, but the bank was not able to transfer those funds without specific instructions.

The appellant’s neighbor died six days later. Upon notification, the bank immediately froze her accounts. The appellant tried to deposit the cheque at his own bank, but it was returned, marked “funds frozen.”

The estate declines to make good on the cheque

The respondent, who is the stepson of the deceased and acted as the trustee for the estate, had originally told the appellant that he would receive the $100,000 bequest as directed by the will as well as another $100,000 to cover the cheque. However, after obtaining legal advice, he changed his position, stating the cheque was an imperfect gift and was unenforceable. The appellant sued the estate for the value of the cheque, but lost.

A what point is a gift of a cheque considered “delivered”?

The appellant had suggested at trial that the cheque was for services rendered. The trial judge found that the appellant had helped the deceased without the expectation of compensation. There was no evidence of a contract between the two.

The trial judge then addressed whether the cheque was a gift and outlined the essential elements of a gift.

  1. The donor’s intention to make the gift
  2. The acceptance of the gift by the donee
  3. The delivery of the gift to the donee

The trial judge found the first two elements has been met, but the third had not. The deceased did not have the funds in her account to cover the amount of the cheque, and despite having the mental capacity to do so, did not attempt to transfer funds from one account to another in order to cover the cheque.

On appeal, the court found no errors in the trial judge’s decision. The court emphasized the importance of the delivery element of a gift, stating “The delivery requirement in the law of gifts continues to serve several important functions. It forces a would-be donor to consider the consequences of their expressed intention to make a gift and it furnishes tangible proof that a gift has in fact been made” The court explained that the gift of a cheque is not the same as a gift of money. Instead, a cheque is a direction from the doner to the bank to pay the donee a sum of money. However, the doner can reverse those instructions at any time, such as through a “stop payment” order. AS a result, the delivery of a gift of a cheque is not complete until the cheque is cashed.

Dealing with the logistics related to the estate of a loved one can be an overwhelming and stressful experience. There are particular responsibilities for executors of estates – people charged with carrying out the wishes of the deceased. The lawyers at Arbesman Hamilton LLP have extensive experience in helping with all the responsibilities of an executor. We also help those involved in disputes over wills. Contact us online or by phone at 416-481-5604 to talk today.