In the case of Morrison Estate (Re), 2015 ABQB 769, released by the Alberta Court of Queen’s Bench on December 8, the court considers whether the presumption of resulting trust, as set out in Pecore, applies to beneficiary designations made by a deceased in favour of an adult child.

The testator’s will provided that his estate was to be divided equally among his four children, after a $11,000 bequest to his grandchildren (to be divided among them equally). However, the largest asset owned by the deceased on his death was a RRIF, and he had designated his one son, Douglas, as the sole beneficiary. The beneficiary designation had been signed shortly after his will.

One of the other children brought an application for advice and directions, seeking a direction that the RRIF was an asset of the estate, pursuant to the principles in Pecore: there was no consideration for him to have been designated as a beneficiary and that Douglas has failed to prove that his father intended to gift him the RRIF to the exclusion of his siblings.

The court considers the limited case law on this issue, which includes

• McConomy-Wood v McConomy,2009 CanLII 7174 (ONSC) which considers Pecore in the context of RRIFs. The court in that case considered the beneficiary designation of the RRIF as a gratuitous transfer and applied the principle articulated in Pecore, asking what the intention of the transferor was at the time of the transfer. The case did not apply a presumption but instead found that there was ample evidence that the deceased intended the RRIF beneficiary to hold the funds in trust for the beneficiaries of the estate, in equal shares.
• Dreger v Dreger,[1994] 10 WWR 293 (MBCA) which considers resulting trusts in the context of beneficiary designations under insurance policies. The insured had designated her son (also executor) as beneficiary under several insurance policies and her RRSP. Sometime after, she had another child, and in her will she made provision for that child. Instructions to her solicitor for the preparation of that will and a subsequent codicil indicated that she believed that the insurance policies and the RRSP would form part of her estate. The decision focused on resulting trusts, and the competition between the presumption of advancement in favour of a child, and the presumption of resulting trust in the context of gratuitous transfers. The court found that “the law with respect to resulting trusts includes insurance and annuity contracts, and the relevant time to determine intent will normally be the time when the designation of beneficiary is made” (at para. 27) but then held that the presumption of advancement which applied to the transfer to the adult son had been rebutted, and the son held the insurance and RRSP proceeds in trust for the estate.
• Nelson v Little Estate,2005 SKCA 120, in which the Saskatchewan Court of Appeal held that simple lack of consideration does not avoid the effectiveness of the designation of a beneficiary of a RRIF and as such the principles surrounding resulting trusts should not be applied.

The court then sets out the difficulties with applying Pecore to beneficiary designations.

For one, there are far-reaching effects to a decision finding that the presumption of resulting trust applies to beneficiary designations in favour of an adult child: “there is the potential that any non-spousal designated beneficiary (whether under an RRSP, RRIF or life insurance policy) will be deemed to hold proceeds in trust for the donor’s estate unless he or she can prove that a gift was intended” (at para. 21).

It also would seem to go against, in many circumstances, the intentions of the deceased in making the beneficiary designation in the first place. The court indicated that in the absence of evidence to the contrary, it should be presumed that the deceased knew what he was doing when he made a beneficiary designation. Such designations offer tax and other benefits, such as creditor-proofing, over having the plan go to the owner’s estate.

The court as a result opines that it can “frankly think of no sound policy reason why beneficiary designations under RRSPs, RRIFs and insurance policies should not be treated in a similar fashion to beneficiary designations under a will. None of these ‘gifts’ take effect until the death of the owner of the plan or policy. With the exception of irrevocable beneficiaries under some life insurance policies, the owner is free to change beneficiaries during his or her lifetime, so long as he or she is of sound mind” (at para. 45).

However, while the court would prefer to treat such designations differently from other forms of gifts, such as gifts of joint ownership of property or joint bank accounts, ultimately it is loath to go against what appears to be the law as established in Dreger, that the law of resulting trusts applies to beneficiary designations. Accordingly, the court instead decides the matter without resort to presumptions, and finds that there is sufficient evidence that the deceased intended to gift the RRIF to Douglas. That evidence includes:

1. The close relationship between Douglas and his father that existed at the time of the beneficiary designation;
2. The assistance rendered to Mr. Morrison by Douglas in the time surrounding and immediately following Mrs. Morrison’s death; and
3. The close temporal connection between the making of the will appointing Douglas and Heather joint alternate executors and the signing of the beneficiary designation in favour of Douglas only.

The court recognizes this is a “very thin” finding, but nevertheless finds that it is enough to tip the balance of probabilities at 50.01%.