Presumptions of Resulting Trust and Beneficiary Designations Revisited

June 29, 2021 Nick Esterbauer Beneficiary Designations, Estate & Trust, Estate Planning, Joint Accounts, RRSPs/Insurance Policies Tags: , , , , , , , , 0 Comments

A recent decision of the Ontario Superior Court of Justice revisits the issue of whether a presumption of resulting trust should be imposed in the case of a beneficiary designation.

As our readers will know, the leading case on presumptions of resulting trust remains Pecore v Pecore, 2007 SCC 17, in which the Supreme Court summarized the state of the law relating to property that had been gratuitously transferred into joint tenancy with a non-dependent adult child: the asset becomes subject to a presumption that it is impressed with a resulting trust in favour of the parent’s estate.  The presumption may be rebutted by evidence that it was, in fact, the parent’s intention to gift the jointly-held property to the adult child by right of survivorship.

Last year, we saw a couple of decisions apply the principles of Pecore to novel situations, potentially expanding the applicability of presumptions of resulting trust.  For example, in Calmusky v Calmusky, 2020 ONSC 1506, the doctrine of resulting trust was applied to a RIF for which an adult child had been designated as beneficiary.

In Mak Estate v Mak, 2021 ONSC 4415, Justice McKelvey reviewed the issue of whether an asset for which a beneficiary designation was in place should be subject to the presumption of resulting trust.  The plaintiff residuary beneficiaries of their mother’s estate sought an order setting aside the 2007 beneficiary designation for the mother’s RRIF, under which the defendant, their brother and another residuary beneficiary of the estate, was named.  The evidence suggested that the deceased had relied upon the defendant, who lived with her and drove her to appointments after the death of the parties’ father in 2002.

After addressing the issue of whether a presumption of undue influence applied to the RRIF beneficiary designation (and finding that it did not because a beneficiary designation is not an inter vivos gift), Justice McKelvey turned to the issue of the principle of resulting trust, writing (at paras 44, 46):

In my view…there is good reason to doubt the conclusion that the doctrine of resulting trust applies to a beneficiary designation. First, the presumption in Pecore applies to inter vivos gifts. This was a significant factor for the Court of Appeal in Seguin, and similarly is a significant difference in the context of a resulting trust. Further, the decision of this Court in Calmusky has been the subject of some critical comment. As noted by Demetre Vasilounis in an article entitled ‘A Presumptive Peril: The Law of Beneficiary Designations is Now in Flux’, the decision in Calmusky is, ‘ruffling some features among banks, financial advisors and estate planning lawyers in Ontario’. In his article, the author comments that there is usually no need to determine ‘intent’ behind this designation, as this kind of beneficiary designation is supported by legislation including in Part III of the Succession Law Reform Act (the “SLRA”). Subsection 51(1) of the SLRA states that an individual may designate a beneficiary of a ‘plan’ (including a RIF, pursuant to subsection 54.1(1) of the SLRA.)

It is also important that the presumption of resulting trust with respect to adult children evolved from the formerly recognized presumption of advancement, a sometimes erroneous assumption for a parent that arranges for joint ownership of an asset with their child is merely ‘advancing’ the asset to such adult child as such adult child will eventually be entitled to such asset upon such parent’s death. The whole point of a beneficiary designation, however, is to specifically state what is to happen to an asset upon death.

As a result, the defendant was entitled to retain the proceeds of his mother’s RRIF, as the plaintiffs unable to establish any intention of their mother to benefit her estate with the asset without the benefit of a presumption of resulting trust.

In light of the conflicting applications of Pecore under the Calmusky and Mak Estate decisions, it will be interesting to see how this issue may be further developed in the case law.  For the time being, however, it may be prudent to take care in documenting a client’s wishes to benefit an adult child by way of beneficiary designation in the same manner as we typically would in situations of jointly-held property.

Thank you for reading.

Nick Esterbauer

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