Tag: Joint Accounts

29 Jun

Presumptions of Resulting Trust and Beneficiary Designations Revisited

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

16 Oct

The Risks of Joint Tenancy

Rebecca Rauws Estate & Trust, Joint Accounts, Uncategorized Tags: , , , , , , , , , , , , 0 Comments

Although there are certainly some benefits that may result from making ownership of a property or other asset joint with another individual (e.g. avoiding payment of estate administration tax in relation to that property upon the death of one of the joint owners), there can also be risks associated with jointly-held property.

In the recent British Columbia Supreme Court decision in Gully v Gully, 2018 BCSC 1590, a mother added her son as a joint tenant on real property that she owned (the “House”). Her decision to do so was based on estate planning advice that she had received. The mother did not tell her son that she had added him as a joint tenant, and the son did not contribute to the House in any way, either before or after it was transferred into joint tenancy. Contemporaneously with the registration of title to the House in joint tenancy, the mother also executed a last will and testament specifically setting out that in naming her son as a joint owner, she intended that the asset would belong to him upon her death.

A couple of years after the mother had added the son as a joint tenant on her House, the son and his software company consented to judgment in favour of a creditor in the amount of $800,000.00. At the time he consented to judgment, the son was still not aware that he was a joint owner of his mother’s House. The creditor subsequently registered a certificate of judgment on the son’s undivided half interest in the House.

The mother brought an application seeking a declaration that the son held his interest in the House on a resulting trust in her favour. The court stated that the proper evidence of a transferor’s intention is at the time of the transfer, because a transferor can change his or her mind subsequent to the transfer, but may not retract a gift once it has been made. In this case the court concluded that the mother did intend to gift an interest in the House to her son at the time the joint tenancy was registered on title, and that the son did not hold his interest on a resulting trust in favour of the mother.

Further, the court stated that even if it had found that the mother had not intended to gift the House to the son, the fact that the joint tenancy was registered on title to the House meant that the creditor could rely on title to enforce its judgment against the son’s interest in the House. Although the issue of whether or not a resulting trust arises in the circumstances may be relevant  as between family members or beneficiaries of an estate, it is not applicable in the case of a third party creditor claiming against a registered interest in land. As a side note, the creditor in this case did advise the court that it did not intend to execute the judgment against the House while the mother was still living there.

Before making any changes to ownership of an asset, it is crucial to obtain comprehensive advice as to all of the possible consequences of doing so—both positive and negative. Communication regarding joint tenancy is also important. This will help ensure that all parties are aware of the assets in which they may have an interest and the nature of any such interest, so they are in a position to manage their affairs accordingly.

Thanks for reading,

Rebecca Rauws

 

Other blog posts that you may find interesting:

25 Jul

Joint Accounts Between Spouses

David M Smith Joint Accounts, Litigation, Uncategorized Tags: , , , 0 Comments

Subsection 14(a) of the Family Law Act provides that property held by spouses in joint accounts shall be intended, in the absence of proof to the contrary, to be owned jointly. The presumption may be rebutted by the spouse who seeks to have such monies excluded from net family property (Belgiorgio v. Belgiorgio, 2000 CanLII 22733 (ON SC)).

In LeCouteur v. LeCouteur, 2005 CanLII 8726 (ON SC), the court held that the husband failed to rebut the presumption of resulting trust in respect of funds in a joint account that had “traditionally been used to carry out family decisions for funding special projects”, such as renovations.

In Belgiorgio, the court held that a joint bank account in which the husband deposited his inheritance was used for household expenses and purchases, and was commingled with household income. The court found that the inheritance lost its excluded character when it was placed in a joint bank account; it was his intention at the time he deposited the funds that was relevant.

In the recent Ontario Superior Court of Justice case of McLean v. Dahl, a husband sought a declaration that he was the sole owner of proceeds in a joint bank account in the amount of $94,565 at the date of separation.

The Court considered the following facts in arriving at a determination that the presumption of joint ownership was not rebutted:

  • Both parties used the account as they saw fit; however, it was their practice to consult one another if major purchases were to be made;
  • When the parties decided to grant a sizeable loan to friends, the funds came from the joint account. When the funds were repaid to the wife alone, she returned them to the joint bank account;
  • When the parties decided to work on their marriage, they agreed to put these funds into a joint account on the condition that both their signatures were required to make a withdrawal;
  • Mr. McLean intentionally transferred solely-held funds to the parties’ joint names;
  • the spouses discussed major transactions using these funds;
  • the parties shared the tax liability for income on these funds.

In summary, the Court observed that “…when the parties agreed to work on their marriage, after Mr. McLean closed the first joint account, they opened a second joint account into which each deposited monies in his or her control. This was the second time that Mr. McLean intentionally placed funds in Ms. Dahl’s control. It is obvious from his pattern of conduct that he intended her to have access to funds in joint accounts.”

Accordingly, the Court found that, “from the time that Mr. McLean added Ms. Dahl’s name to the account, she became a half-owner, and the parties were entitled to one-half the funds in the parties’ joint account in the amount of $47,282 each.”

Thanks for reading,
David Morgan Smith

Other blogs that may be of interest:

Think Your Joint Accounts Will Pass Automatically on Your Death? Don’t Bank On It

Decisions on the Difficult Issue of Joint Accounts

 

28 Jun

Joint Bank Accounts: Intention is Everything

Suzana Popovic-Montag Hull on Estate and Succession Planning, Hull on Estates, Joint Accounts, Litigation Tags: , , , , 0 Comments

The idea of a joint bank account seems simple enough. Two people own assets in a joint account. When one of them dies, the survivor automatically gets ownership of the assets. Straightforward, right?

Unfortunately, not in every case. For example, in a very common situation – where an aging parent creates a joint account with an adult child – courts have looked closely at the intention of the parent in creating the joint account. Was it for convenience primarily, or was it intended as a gift to the surviving adult child? Did the parent understand the consequences of setting up a joint account?

Such arrangements have been the source of much litigation in Canada, and the Supreme Court of Canada has been quite clear: unless the survivorship intention in setting up the accounts is clear, courts will presume that joint account assets are held by an adult child on a resulting trust for the parent’s estate, and distributed according to the parent’s will.

For parents who are considering a joint account arrangement with an adult child – and intend the adult child to inherit the assets through survivorship – they may want to take some steps to ensure that this intention is clear. This includes:

  • Communicating their intention to any other adult children they have, and any other beneficiaries, to reduce the chance of a dispute
  • Documenting the joint account and the intentions for survivorship directly in their will
  • Granting the adult child joint account holder a power of attorney in addition to the joint account arrangement. This shows that the joint account was not created for convenience alone, as the adult child could manage the parent’s financial affairs under the power of attorney.

Here is a good summary of court rulings on this matter: http://www.lerners.ca/lernx/joint-accounts-is-the-surviving-owner-really-entitled-to-the-money/. And for an overview of some of the risks associated with joint accounts, this article outlines some factors to consider: https://nelligan.ca/article/joint-bank-accounts-are-they-a-good-idea/.

While joint accounts can serve many useful purposes, they should be created carefully, with advance thought and sound legal advice.

Thank you for reading … Have a great day.
Suzana Popovic-Montag

18 May

Complications from Simultaneous Deaths

Natalia R. Angelini Estate Planning, Executors and Trustees, General Interest, In the News, Joint Accounts, RRSPs/Insurance Policies, Support After Death, Trustees, Uncategorized, Wills Tags: , , , , , , 0 Comments

In Ontario, if two people die at the same time or in circumstances rendering it uncertain which of them survived the other, the property of each person shall be disposed of as if he or she had survived the other (see s. 55(1) of the SLRA).  In short, each person’s Will is administered as if the spouse predeceased. This outcome can be particularly problematic in various circumstances, a few of which I touch upon below.

Spouses with mirror wills.  Without a common disaster clause that would address circumstances where both spouses die simultaneously, there may be certain bequests that are triggered twice.  For instance, mirror wills may provide that (i) the residue of the testator’s estate is to be transferred to the spouse if he/she survives the other by 30 days, and (ii) if the spouse predeceases or fails to survive the other by 30 days, a specific bequest is gifted to Child #1, with the residue going to Child #2.  Since neither husband nor wife survived the other for30 days, Child #1 would get two specific bequests, one from each of the parents’ estates, reducing the entitlement of the residuary beneficiary, Child #2.

No alternate executor. Spouses often name the other as their executor.  If no alternate is named and they die simultaneously, the executor appointment would go on an intestacy (see s. 29 of the Estates Act), and the testator has lost the power to control who administers the estate.

Joint assets. Where joint tenants die at the same time, unless a contrary intention appears, the joint tenants are deemed to have held the property in question as tenants in common (see s. 55(2) of the SLRA).

Insurance proceeds. If the insured and the beneficiary die at the same time, the proceeds of a policy are to be paid as if the beneficiary predeceased the insured (see SLRA s. 55(4), and Insurance Act ss. 215 and 319). If there is no alternate beneficiary, and unless the insurance contract provides otherwise, the proceeds would be payable to the estate and subject to probate fees.

These examples serve to illustrate the value in having simultaneous deaths form part of your checklist when advising estate-planning clients.  For more on this topic, I encourage you to read this article and to watch/listen to my recent podcast with Rebecca Rauws.

Thanks for reading and have a great day,

Natalia R. Angelini

Other Articles You Might Be Interested In

Life and Death Under the Health Care Consent Act

Double Legacies – A Trap to Avoid

Polygamous Marriages and the SLRA

30 Sep

The High Cost of Probate

Suzana Popovic-Montag Estate & Trust, Estate Planning, Wills Tags: , , , , 0 Comments

Many third parties such as banking institutions and the Land Registry Office require probate as proof of authority to act as estate trustee. Unfortunately, the process of probate brings with it the widely unpopular Estate Administration Tax which is calculated on the value of the assets of the estate. As a result, estate planning methods that seek to remove assets from an estate and transfer them directly to a beneficiary are becoming increasingly popular. These include the transfers of title of real property into joint tenancies with rights of survivorship, adding joint account holders to bank accounts, designating beneficiaries in insurance policies, lifetime gifting and the use of multiple wills.

The challenge that some of these techniques brings is that when used in a way that does not ensure an equal distribution of assets among beneficiaries or when the intentions of the testator are later brought into question, they all too often become land mines associated with an increased likelihood of estate litigation.

The question becomes: what is probate and the resulting Estate Administration Tax really costing us? When avoiding probate at all costs begins to encourage risky behaviours that would not have otherwise been taken, we need to start to consider whether certain safeguards need to be implemented.

In looking to the rest of Canada, we can see in both Alberta and Quebec two alternative models. In Alberta, the probate process has created an upper limit or maximum fee that can be payable. This is currently set at $400.00 for estates of $250,000.00 or more. In this way, the incentive to attempt to distribute assets outside of the will has been largely removed.

In Quebec, they have gone even a step further. There is a flat fee for the probate of any estate, regardless of its value, which is currently set at $105.00. However, if the testator has obtained a notarial will, there is no fee at all as notarial wills are not subject to probate. The will is immediately valid upon the death of the testator and is in and of itself valid proof of the authority of the liquidator (i.e. estate trustee) to act.

Aside from the removal of incentives, there are other precautionary measures that can be taken. For instance, public legal education on the effects of lifetime transfers, joint accounts and joint tenancy could be beneficial. These estate planning tools can be effectively and safely used provided that the testator and any joint tenants or account holders have an accurate understanding of the consequences that can arise as a result of these types of transfers.

Furthermore, obtaining proper and independent legal advice beforehand is always recommended. The law with respect to joint assets is still evolving and can give rise to complex issues that can have significant ramifications for the testator, estate and the beneficiaries.

Thank you for reading.

Suzana Popovic-Montag

 

03 Sep

Caregivers & Fiduciary Obligations

Hull & Hull LLP Capacity, Estate & Trust, Health / Medical, Joint Accounts, Litigation Tags: , , , , , , , , , , , 0 Comments

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:

  1. The fiduciary has scope for the exercise of some discretion or power;
  2. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests; and
  3. 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.

Noah Weisberg

11 Apr

Joint Property and Intention Evidence

Hull & Hull LLP Joint Accounts Tags: , , , 0 Comments

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

03 Aug

All the More Reason to Put a Ring On It

Hull & Hull LLP Joint Accounts, Litigation Tags: , , , , , , , , 0 Comments

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?

  1. 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.
  2. 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.

12 May

Joint GICs and the Presumption of Resulting Trust

Hull & Hull LLP Estate & Trust, Joint Accounts Tags: , 0 Comments

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.
 

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