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| WILLS AND ESTATES: PRESUMPTIONS OF RESULTING TRUST AND ADVANCEMENT |
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Pecore v. Pecore (Ont. C.A., September 8, 2005) (31202) " An ageing father gratuitously placed the bulk of his assets in joint accounts with his daughter P, who was the closest to him of his three adult children. Unlike her siblings, who were financially secure, P worked at various low‑paying jobs and took care of her quadriplegic husband, M. P’s father helped P and her family financially, including buying them a van, making improvements to their home, and assisting her son while he was attending university. P’s father alone deposited funds into the joint accounts. He continued to use and control the accounts, and declared and paid all the taxes on the income made from the assets in the accounts. In his will, P’s father left specific bequests to P, M and her children but did not mention the accounts. The residue of the estate was to be divided equally between P and M. Upon the father’s death, P redeemed the balance in the joint accounts on the basis of a right of survivorship. P and M later divorced, and a dispute over the accounts arose during their matrimonial property proceedings. M claimed that P held the balance in the accounts in trust for the benefit of her father’s estate and, consequently, the assets formed part of the residue and should be distributed according to the will. The trial judge held that P’s father intended to make a gift of the beneficial interest in the accounts upon his death to P alone, concluding that the evidence failed to rebut the presumption of advancement. The Court of Appeal dismissed M’s appeal, but found that it was not necessary to rely on the presumption of advancement because the presumption is only relevant in the absence of evidence of actual intention or where the evidence is evenly balanced." The Supreme Court of Canada held (unanimously) the appeal is dismissed with costs. Justice Rothstein wrote the following (at pp. 1-3, 16-18, 20, 27): “This appeal involves questions about joint bank and investment accounts where only one of the account holders deposits funds into the account. These types of joint accounts are used by many Canadians for a variety of purposes, including estate-planning and financial management. Given their widespread use, the law relating to how these accounts are to be treated by courts after the death of one of the account holders is a matter appropriate for this court to address. Depending on the terms of the agreement between the bank and the two joint account holders, each may have the legal right to withdraw any or all funds from the accounts at any time and each may have a right of survivorship. If only one of the joint account holders is paying into the account and he or she dies first, it raises questions about whether he or she intended to have the funds in the joint account go to the other joint account holder alone or to have those funds distributed according to his or her will. How to answer this question is the subject of this appeal. ...While the focus in any dispute over a gratuitous transfer is the actual intention of the transferor at the time of the transfer, intention is often difficult to ascertain, especially where the transferor is deceased. Common law rules have developed to guide a court’s inquiry. This appeal raises the following issues: 1. Do the presumptions of resulting trust and advancement continue to apply in modern times? 2. If so, on what standard will the presumptions be rebutted? 3. How should courts treat survivorship in the context of a joint account? 4. What evidence may courts consider in determining the intent of a transferor? In this case, the trial judge found that the father actually intended a gift and held that his daughter may retain the assets in the accounts. The Court of Appeal dismissed the appeal of the daughter’s ex-husband. I conclude that there is no basis to overturn this result. ...The weight of recent authority, however, suggests that the civil standard, the balance of probabilities, is applicable to rebut the presumptions…This is also my view. I see no reason to depart from the normal civil standard of proof. The evidence required to rebut both presumptions, therefore, is evidence of the transferor’s contrary intention on the balance of probabilities. ...There may be a number of reasons why an individual would gratuitously transfer assets into a joint account having this intention. A typical reason is that the transferor wishes to have the assistance of the transferee with the management of his or her financial affairs, often because the transferor is ageing or disabled. At the same time, the transferor may wish to avoid probate fees and/or make after-death disposition to the transferee less cumbersome and time consuming. ...I am of the view that the rights of survivorship, both legal and equitable, vest when the joint account is opened and the gift of those rights is therefore inter vivos in nature. ...Of course, the presumption of a resulting trust means that it will fall to the surviving joint account holder to prove that the transferor intended to gift the right of survivorship to whatever assets are left in the account to the survivor. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will. Should the avoidance of probate fees be of concern to the legislature, it is open to it to enact legislation to deal with the matter. ...Where, in setting up a joint account, the transferor intends to transfer full legal and equitable title to the assets in the account immediately and the value of the assets reflects a capital gain, taxes on capital gains may become payable in the year the joint account is set up. However, where the transferor’s intention is to gift the right of survivorship to the transferee but retain beneficial ownership of the assets during his or her lifetime, there would appear to be no disposition at the moment of the setting up of the joint account: see s. 73 of the Income Tax Act., R.S.C. 1985, c. 1 (5th Supp.). That said, the issue of the proper treatment of capital gains in the setting up of joint accounts was not argued in this appeal. I can say no more than these are matters for determination between the Canada Revenue Agency and taxpayers in specific cases." Justice Abella in concurring reasons, wrote the following (at pp. 1, 11-12): "Tolstoy wrote at the beginning of Anna Karenina that ‘Happy families are all alike, every unhappy family is unhappy in its own way’. That unhappiness often finds its painful way into a courtroom. ...It seems to me that bank account documents which specifically confirm a survivorship interest, should be deemed to reflect an intention that what has been signed, is sincerely meant...I think it would come as a surprise to most Canadian parents to learn that in the creation of joint bank accounts with rights of survivorship, there is little evidentiary value in the clear language of what they have voluntarily signed. It is significant to me that even though the presumption of advancement has generally been replaced in the spousal context by the presumption of resulting trust, it has nonetheless been conceptually retained in the case of spousal property which is jointly owned, such as joint bank accounts. ...Equally, a presumed intention of joint ownership in the case of jointly held property should apply to parent-child relationships, and the appropriate mechanism for achieving this objective, absent legislative intervention, is the application of the presumption of advancement. The trial judge, whose conclusion was upheld by the Court of Appeal, properly applied the correct legal presumption to the facts of the case." Click here for the full text of case WILLS AND ESTATES: PRESUMPTIONS OF RESULTING TRUST AND ADVANCEMENT Madsen Estate v. Saylor (Ont. C.A., November 1, 2005) (31262) " P, an adult daughter, was made a joint account holder by her father following the death of her mother. The accounts had a right of survivorship. P’s father also executed a power of attorney in her favour and she remained the named alternate executor under his will, which was never changed after her mother’s death. P’s father retained control of the bank accounts and the funds were used solely for his benefit during his life. He also declared and paid all taxes on income made from the accounts. There was conflicting evidence from P and her siblings as to their relationships with their father, P claiming to be the preferred child. Under her father’s will, P and her two siblings were to share one half of her father’s estate. Following the father’s death litigation was commenced by P’s siblings against P as executor because she did not include the accounts in the distribution of the estate. Applying a presumption of resulting trust, the trial judge found that there was no evidence to support P’s position that her father intended to gift the joint accounts to her and held that they should be included in the father’s estate. The Court of Appeal affirmed the decision. The majority concluded that the trial judge was incorrect in applying the law of resulting trust and should have applied the presumption of advancement, but added that she was not required to consider either presumption because the intention of the father at the time of the transfer was demonstrated on the evidence." The Supreme Court of Canada held (8:1) the appeal is dismissed with costs to the Respondents payable by Ms. Brooks and not out of the estate. (Abella J. dissenting) Justice Rothstein wrote the follow (at pp. 1, 6-7): "This appeal, like its companion case, Pecore v. Pecore, 2007 SCC 17 (released concurrently), involves questions about joint bank and investment accounts. As discussed more fully in Pecore, joint accounts are used by many Canadians for a variety of purposes, including estate planning and financial management. ...As discussed in Pecore , at paras. 62-66, the fact that a transferor maintains sole control over or use of funds in a joint account will not be determinative of whether a transferee is entitled to the balance in the account upon the transferor’s death. Whether or not a transferor continues to pay tax on the income of the joint accounts is also not determinative. However, I am unable to agree with the trial judge that there was no evidence to suggest that Patricia’s father intended for her alone to have the assets in the joint accounts. On the relevant financial institution documents, the father elected to have the joint accounts carry a right of survivorship. Patricia testified that both she and her father acknowledged that they understood at the time that this meant that on the death of one of the joint account holders, the other would become the sole owner. As discussed in Pecore , at para. 61, banking documents may, in modern times, be detailed enough that they provide strong evidence of the intention of the transferor regarding how the balance in the accounts should be treated on his or her death. The clearer the evidence in the documents, the more weight that evidence should carry. ...The question now is whether this matter should be remitted to the trial judge to redetermine the result taking account of the evidence that she ignored in her initial decision or whether it is appropriate for this court to substitute its decision for that of the trial judge. ...Having regard to the fact that this case has been to trial — a trial which lasted approximately 15 days — has been to appeal and now has been further appealed to this Court, it is difficult to see how any of the litigants will benefit if the matter is remitted for yet another trial. ...Having regard to the circumstances of the present appeal, I think it is both feasible on a practical level and within the interests of justice for this Court to consider the evidence not considered by the trial judge and make a final determination rather than sending the case back to trial." Justice Abella in dissenting reasons, wrote the following (at p. 1): "My views on the scope of the presumption of advancement are discussed in the Pecore decision (2007 SCC 17), released concurrently. Like the majority, I would apply the presumption of advancement to all gratuitous transfers from parents to their children regardless of the parent’s gender. Unlike the majority, I would not restrict its application to transfers to non-adult children. In Pecore, the difference in our legal approaches did not lead me to a different result. In this appeal, it does. I would allow the appeal and order a new trial." Click here for the full text of case |
| with the permission of Eugene Meehan, Q.C., Chair, Supreme Court Practice Group, Lang Michener LLP Ottawa, eemeehan@langmichener ca |
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