Category: Joint Accounts
Reeves v. Dean, a recent decision of the Supreme Court of British Columbia (BCSC), acts as a helpful reminder that a fiduciary relationship may arise between a caregiver and their client.
The plaintiff was 50 years old and suffered from developmental delays making her unable to independently manage her finances. The defendant was the plaintiff’s caregiver pursuant to a contract of services between the defendant and the Provincial Government. The plaintiff sought damages based on, amongst other things, breach of fiduciary duty arising from the misappropriation of monies arising from a joint account between the plaintiff and defendant.
The decision of Ben-Israel v. Vitacare Medical Products Inc. (ON SC) provides a helpful summary of the traditional categories of relationship in which a fiduciary duty exists: agent to principal; lawyer to client; trustee to beneficiary; business partner to partner; and, director to corporation. In addition, as set out in the Supreme Court of Canada decision in Lac Minerals v. International Resources, relationships in which a fiduciary obligation have been imposed appear to possess three general characteristics:
- The fiduciary has scope for the exercise of some discretion or power;
- The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests; and
- The beneficiary is peculiarly vulnerable to, or at the mercy of, the fiduciary holding the discretion or power.
Of the three characteristics, the BCSC found that it was the vulnerability of the client that was essential to a finding of a fiduciary relationship. As such, since the plaintiff was in a position of disadvantage regarding the administration of the joint account monies, and consequently placed her trust in the defendant, a fiduciary relationship was found to exist between the plaintiff and defendant.
Therefore, the plaintiff was entitled to rely on the remedies available for breach of fiduciary duty including constructive trust, accounting for profits, and equitable compensation to restore to the plaintiff what was lost.
In yesterday’s blog post, I discussed a recent Ontario Superior Court of Justice decision that shows the litigation that can arise between beneficiaries when the deceased dies intestate and uses joint bank accounts as a form of estate planning. Today, I would like to discuss a recent decision from the Ontario Court of Appeal where the deceased made a will, but subsequently deposited some of the bequeathed property into a joint bank account with a right of survivorship to his adult children.
In Foley (Re), 2015 ONCA 382, the deceased was survived by his son Donald and his daughter Dorothy. The deceased made a Will in 1990 where he made a specific bequest of “all Canada Savings Bonds registered in my name only at the time of my death” to Dorothy.
In 1996, the deceased established a joint bank account with a right of survivorship and named Donald and Dorothy as joint tenants of the account. The deceased’s financial advisor testified that he was trying to avoid the costs associated with probate, and the Court of Appeal noted that “he assured [the financial advisor] that his children would know how to divide the assets” in the joint account.
The deceased was the only contributor to the joint account. Unbeknownst to Donald and Dorothy, the deceased deposited the Canada Savings Bonds into the joint account. Upon his death, the Canada Savings Bonds were redeemed and distributed to Dorothy in accordance with the Will.
In addition to challenging three money transfers that the deceased made to Dorothy prior to his death, Donald argued that the deceased intended to gift the contents of the joint bank account equally between his children. In the alternative, Donald argued that the gift of the Canada Savings Bonds adeemed when the bonds were deposited into the joint bank account.
As I noted yesterday, there is a presumption of resulting trust when a parent makes a gratuitous transfer of property into a joint account with an adult child unless the child can rebut the presumption and prove that the parent intended to make a gift. In addition, under the principle of ademption, when a deceased makes a specific bequest but the subject property is not found among the deceased’s assets after death, the gift can fail or “adeem.”
At trial, the Honourable Madam Justice Mullins rejected Donald’s arguments, holding that he had failed to rebut the presumption of a resulting trust. The bonds were endorsed by a teller’s stamp prior to being deposited into the joint bank account. Justice Mullins held that the bonds became negotiable instruments because of the endorsement but the gift did not adeem because the bonds were still in the deceased’s name, as required by the terms of the bequest under the Will. The Court of Appeal upheld the trial judge’s findings and dismissed the appeal.
In yesterday’s post, I noted the importance of ensuring that your intentions are clear when using joint accounts as an estate planning tool. The Foley decision highlights the need to also ensure that joint accounts are used in a manner that is consistent with the rest of your estate plan. When you intend to make a specific bequest to a beneficiary under your will, great care should be taken to ensure that the bequeathed property is not placed in a joint bank account that is meant to pass outside the estate. The failure to do so may lead to confusion about your intentions and potential litigation between the beneficiaries of the estate.
Thank you for reading and have a great weekend.
Umair Abdul Qadir
The use of joint accounts as an estate planning tool continues to gain in popularity. For example, parents may create joint bank accounts with their adult children, with the intention that the children receive the remaining balance in the joint account as a “gift” by right of survivorship upon the parent’s death.
In theory, joint accounts are easy and convenient to set up, and allow you to minimize estate administration tax because the jointly-held assets pass outside the estate. However, in practice, the use of joint accounts may create unintended results.
In Pecore v Pecore, 2007 SCC 17, the Supreme Court of Canada confirmed that there is a presumption of resulting trust when a parent makes a gratuitous transfer of property into a joint account with an adult child. In other words, the transferee will be found to be holding the assets in trust for the benefit of the estate unless he or she can rebut the presumption by proving that the transferor intended to make a gift.
Over the next two days, I will highlight two recent decisions where the use of joint bank accounts by the deceased became a litigated issue between the parties.
In Johnson v Johnson Estate, 2015 ONSC 3765, the deceased was survived by one son (“Wayne”). The deceased’s other son predeceased her, but left a son (“Michael”). The deceased died without a will, and her grandson Michael claimed that he was entitled half of the value of the estate in accordance with the rules of intestacy. However, the deceased’s son Wayne took the position that Michael was not entitled to the monies in the bank accounts and investment accounts that Wayne held jointly with the deceased prior to her death.
Wayne argued that the joint accounts passed to him by right of survivorship, and that there was sufficient evidence to rebut the presumption of a resulting trust. He claimed that the deceased was using the joint accounts as an estate planning tool and wanted the accounts to pass to him without forming part of the estate. Michael maintained that Wayne had not rebutted the presumption.
The Honourable Madam Justice Woollcombe considered the evidence to determine if the presumption had been rebutted on a balance of probabilities. Justice Woollcombe held that there was insufficient evidence to suggest that the deceased intended to make an outright gift of the jointly-held accounts to her son upon her death. The bank documents did not show the deceased’s intention behind opening the joint accounts, and there was no explanation for why the deceased chose not to similarly hold her home in joint ownership with her son. In addition, there were no testamentary documents or tax documents to help assess the deceased’s intention.
In the result, Justice Woollcombe held that the funds in the joint bank accounts were held on a resulting trust for the deceased’s estate and would be distributed in accordance with the rules of intestacy. Wayne and Michael were each entitled to half of the total value of the deceased’s estate.
The Johnson decision is a strong reminder for individuals who are using joint accounts as an estate planning tool to ensure that their intentions are clearly ascertainable. In the absence of clear evidence, a joint account may unintentionally fall into the deceased’s estate. In addition, confusion regarding a deceased’s intentions can lead to protracted litigation between beneficiaries – likely a far greater expense than the potential savings on probate taxes!
Thank you for reading.
Umair Abdul Qadir
When undertaking legal research, I often look to recent case law as a way to obtain an overview of the seminal cases on any given topic. The recent Ontario Court of Appeal decision in Clarke v. Johnson, 2014 ONCA 237 provides just that on proprietary estoppel.
Briefly, the case involves a camp located on Lake Panage, near Sudbury, Ontario, and whether the respondent has an equitable right to use the camp during his lifetime. While the trial judge found that a claim for proprietary estoppel had been established (thereby granting the respondent a right to occupy the camp), on appeal the appellant submitted that the trial judge erred in his application of the test of proprietary estoppel, specifically with respect to the requirement of unconscionability.
Put simply, proprietary estoppel arises where: (i) there has been a representation or assurance by one person, (ii) that has been relied upon to the detriment of another, and (iii) an equitable Court must intervene to prevent an unjust or unconscionable result.
In Clarke, the Court of Appeal firstly considered the historic 1880 UK decision in Willmott v. Barber which established a five-part test for proprietary estoppel. Often referred to as the “5 Probanda Approach”, the test is as follows: (1) the plaintiff must have made a mistake as to the legal rights to a property; (2) the plaintiff spent money on the faith of the mistake; (3) the owner (and possessor of the legal right) knows their rights and that they are inconsistent with the plaintiff’s rights; (4) the owner is aware of the plaintiff’s mistaken belief of their rights; and (5) the owner encouraged the plaintiff to spend money or perform other acts.
The Court of Appeal secondly considered the influential decision of Schwark v. Cutting which identifies three elements necessary to establish a claim for proprietary estoppel. This is referred to as the “Modern Approach”. Although the decision in Schwark describes the three part test in different language at different parts of the decision, and the interpretation of this in Tiny (Township), the Modern Approach is as follows:
(1) the owner of the land induces, encourages or allows the claimant to believe that he has or will enjoy some right or benefit over the property;
(2) in reliance upon his belief, the claimant acts to his detriment to the knowledge of the owner; and
(3) the owner then seeks to take unconscionable advantage of the claimant by denying him the right or benefit which he expected to receive.
In determining which approach to take, the Court concludes that it is now preferable to adopt the Modern Approach to proprietary estoppel.
In the four years or so that have passed since Pecore was decided, the courts have had the chance to consider the case on several occasions and in various contexts. In decisions ranging from disputes involving family law, estates law, to even the seizure of property as a result of a crime, parties have argued both for and against the presumption of resulting trust using the framework as laid out by Pecore. Throughout all of these diverging fact patterns, however, one thing has held true. The court will always look to what the intention of the transferor was at the time the transfer was made. Some of the factors that may be important in this regard are:
· Wording of the document;
· The use of the property;
· The tax treatment of the property;
· Circumstantial evidence, like degree of friendship or closeness;
· Evidence of actual intention;
· Wording of the Will;
· Whether a power of attorney was granted, as this may show an appreciation of the distinction between granting the power and gifting the right of survivorship; and
· Intention subsequent to a transfer (this is not automatically excluded, but it must be relevant to the intention of the transferor at the time of the transfer, and the judge must assess the reliability of this evidence and determine what weight it should be given, guarding against evidence that is self-serving or that tends to reflect a change in intention).
Thanks for reading,
Natalia Angelini – Click here for more information on Natalia Angelini.
A Nova Scotia judge recently ruled that a lottery prize was not assumed to be mutual asset to be divided upon the breakdown of a common-law relationship.
The National Post recently reported on a man and a woman who had been living together for a number of years and had won $50,000 on a scratch-and-win ticket. The ticket had been purchased by the man. Notwithstanding the fact that the couple had previously shared winnings, the winnings were deposited into a joint account, and part of the winnings were used for a down payment on a property that they both owned, the court found that there was no prior agreement to share the winnings.
(In another recent Ontario case, the judge found that in absence of cogent evidence of a clear intent to share winnings, there will be no requirement to share.)
Had the couple been married, there would have been a presumption that the lottery winnings were joint.
In Ontario, s. 14 of the Family Law Act creates a presumption that in the case of married spouses, the fact that property is held in the names of spouses as joint tenants is proof, in the absence of evidence to the contrary, that the spouses intended to own the property as joint tenants, and money on deposit in the name of both spouses shall be deemed to be in the name of the spouses as joint tenants. The provision does not apply to common-law spouses.
What are the possible lessons from this?
- If you are buying lottery tickets with someone else, be they a friend or unmarried spouse, have some agreement in place to share the winnings.
- As Beyonce says, if you liked it, then you should have put a ring on it.
Thank you for reading.
Paul E. Trudelle – Click here for more information on Paul Trudelle.
Are joint GICs to be considered differently from other jointly held accounts when considering whether the proceeds of such accounts are subject to a presumption of resulting trust for the estate of the deceased account holder? Please read on.
In Pecore v. Pecore, the Supreme Court of Canada considered that, because it is common for elderly parents to hold accounts jointly with adult children for banking purposes, the starting presumption should be in favour of including the funds in the parent’s estate. The adult child will then have the onus of proving that the parent intended to gift the funds to him or her. The Court also addresses the evidence that may be used to defeat the presumption and prove that the parent intended to gift the funds in the account, including the following considerations: (i) whether the account documents show the parent’s intent, (ii) who controlled and used the funds prior to the parent’s death, (iii) whether the deceased parent had a power of attorney, and (iv) who paid the taxes on the account prior to the parent’s death. These considerations are fact-sensitive and that the trial judge is to consider the totality of the evidence and the weight to be placed on any particular factor.
In Videchak v. Giarratano, a 2009 decision of Justice Matheson of the Ontario Superior Court, his Honour, applying Pecore, found that a joint bank account used to pay debts was impressed with a resulting trust for the benefit of the deceased parent. In contrast, His Honour differentiated a jointly held GIC which was noted to be a savings vehicles and not for the payment of debts. In the absence of a characteristic associated with such daily banking, the Court was of the view that the identification of the GIC as joint with right of survivorship was sufficiently determinative of the deceased’s intention respecting that asset. As such, it passed to the joint account holders.
David M. Smith – Click here for more information on David Smith.
Listen to Managing Estate Issues
This week on Hull on Estates, Ian Hull and Suzana Popovic-Montag talk about how to manage an estate dispute as opposed to preventing it. They use an example of a joint account shared between ‘Mom’ and ‘daughter’ to examine the best way to approach posthumous problems and misunderstandings.
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Listen to Piszczek v. Zurawska
This week on Hull on Estates, Christopher Graham and Paul Trudelle discuss the recent decision in the case of Piszczek v. Zurawska that demonstrates the application of a resulting trust of joint accounts.
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Listen to Passing of Accounts and a Joint Retainer
This week on Hull on Estates, Craig Vander Zee and David Smith discuss conflicts of interest during Passing of Accounts trials and rules of professional conduct.