An Outlier Application of Pecore?
Calmusky v. Calmusky is a recent decision that determines the issue of entitlement to certain joint assets. The dispute appears to be a fairly typical one, in that we have an adult child, Gary, who was a joint bank account holder together with his father. Gary claims that after his father’s death the joint account funds passed to him by right of survivorship. Gary’s brother, Randy, argues that the joint account funds revert to the estate.
The Court reviewed the evidence surrounding the opening of the joint account, as well as the making of the father’s Will that happened around the same time. In applying the principles elicited from Pecore, the Court concluded that Gary had not satisfied the burden of proving that his father intended to gift Gary with the remaining funds in the joint account. In so doing, the Court noted the insufficiency of the corroborative evidence relied upon by Gary. It described the bank documentation as “bare bones”, and found the evidence of the bank personnel insufficient to support the conclusion that Gary’s father wanted him to have the beneficial entitlement to the funds.
Nothing new here…so far. But what makes this case noteworthy is the disagreement over the father’s RIF funds. The father designated Gary as the beneficiary of his RIF. Gary claims that these funds belong to him as the designated beneficiary, whereas Randy asserts that the funds belong to the estate. Randy’s argument was that the law relating to the presumptions applicable to annuities and/or life insurance contracts applies by analogy to RIFs, whereas Gary argued that there is no binding authority in Ontario that extends the principles in Pecore to RIF designations.
The Court agreed with Randy, reasoning that the principles set out in Pecore apply more generally to other gratuitous transfers of property interests. The Court also saw it as sensible from a policy perspective that the evidentiary obligation be on the transferee or designated RIF beneficiary. In coming to these conclusions, the Court agreed with the obiter comments in McConomy, another lower court decision, that the principles in Pecore should apply to the RIF designation. The Court also agreed with the reasoning of the Manitoba Court in Dreger, viewing that case as providing additional support for the conclusion that resulting trust presumptions apply to the beneficiary designation under a RIF.
After deciding that the resulting trust principles applied, the Court turned to assessing the father’s intention, again finding that the evidence of the bank personnel and bank documentation was insufficient to corroborate Gary’s position. Thus, the RIF funds were held to form part of the estate.
It does not appear that the Court considered the legislation that uniquely applies to beneficiary designations (e.g. Income Tax Act, Succession Law Reform Act or Insurance Act), which could support the argument that a RIF should be differentiated from a joint account.
Although I expect that this decision may be met with some criticism, until the issue is addressed by a higher court, the case raises several concerning questions – What does it mean for banks, investment advisors and financial planners? Are they now obliged to recommend that their clients seek legal advice to ensure that their intention is documented? Can banks no longer rest assured that they are free to pay out designated funds after the account-holder’s death? Hopefully, the answers to these questions and more will become clear to us in due time.
Thanks for reading and have a great day,
Natalia R. Angelini