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Designation of Beneficiaries and the Presumption of Resulting Trust

Much has been written in recent years on the question whether the presumption of resulting trust applies to beneficiary designations made under various pension and other plans. Regrettably, there were a few cases which held that it does.[1] Both earlier and more recent cases have concluded that it does not.[2] Estate lawyers and others have welcomed the more recent cases, because the cases which concluded that the presumption of resulting trust applies created much uncertainty and interfered with the intention of the plan participant who made the designation. But there remains sufficient uncertainty that it is helpful to consider another recent case which also holds that the presumption does not apply to plans.

Roberts v Roberts[3] contains a helpful discussion of the issue and will serve to put another nail in the coffin of the idea that the presumption of resulting trust applies to beneficiary designations. Ms Roberts died in 2018 at age 96. She remained fully capable and managed her assets and financial affairs until her death. By her will she left her estate in equal shares to her four surviving children Constance, Peggy, Catherine, and Douglas, and her sole grandchild, Dianne, and named her daughters, Constance and Peggy, her executors. She also named Peggy her attorney under her enduring power of attorney. In 2014 she opened a Tax Free Savings Account (‘TFSA’) at a financial institution and signed the necessary paperwork, including a beneficiary designation that named Peggy her beneficiary. She made regular contributions to it until her death. All the children knew of the TFSA and the beneficiary designation (para 12), but only Constance spoke to her mother about it in 2014. She replied, ‘I know what I’m doing. I’m not stupid’. In 2017, Catherine found a bank statement relating to the TFSA, and made a copy of it. She contacted Douglas and asked him if he know of it. He said that he did not. He testified that he contacted Peggy and that she told him that when their mother died, the amount would be shared five ways in accordance with her will. After the mother’s death, Douglas testified that he had a second conversation with Peggy about the TFSA and she said that their mother had cashed it out a few years earlier. Peggy denied both conversations. A meeting scheduled in 2019 between the four children was cancelled. Douglas, Catherine, and Diane then brought this action claiming that they were entitled to an equal share of the balance in the TFSA. The case raised four issues. I shall discuss them seriatim.

1. Limitations

The executors argued that the claims to the TFSA were statute barred. They took the view that the claimants knew of the beneficiary designation in 2017 and that the limitation period began then. However, the court held that it did not. Ms Roberts was still alive then and had full ownership of the TFSA, so Peggy’s interest did not become vested until her mother’s death. Thus, no injury attributable to any party gave rise to a claim in 2017. It was not until a formal accounting was made in 2019 that the claimants would have learnt that the TFSA was not included in the estate, and they filed their claim within two years of that date.

2. Estoppel by Representation

The claimants argued that Peggy represented to them in 2017 that the TFSA would be divided five ways in according with the will. The court found that Douglas’s evidence on the matter was not credible and accepted Peggy’s evidence that she had never made such a statement. But significantly, the court went on to note that until her mother’s death, Peggy did not have any authority with respect to the TFSA that could create an estoppel by representation. While her mother named Peggy her attorney, her mother never lost capacity while she lived and thus Peggy was not acting in a representative capacity for her before her death.

3. Presumption of Resulting Trust

This was the main issue. The court referred to several of the cases mentioned above. It also discussed Re Morrison Estate.[4] In it Graeser J considered s 71 of the Wills and Succession Act,[5] which provides that a person may designate a beneficiary of a plan by an instrument signed by a participant, or by will stated. His Honour stated that in his opinion there was no sound policy reason for treating beneficiary designations made under an instrument differently than those made under a will. However, this was dictum, for he went on to state that he did not have to decide whether the effect of s 71 was to make beneficiary designations made under an instrument testamentary, since he could decide the case without reference to the presumption of resulting trust. On the evidence he found that the father’s beneficiary designation of his RRIF in favour of his son was intended to be a gift.

In Roberts the court held that the beneficiary designation was effective for three reasons:

First, it is clear from s 71 that the designated benefit is not perfected until the death of the plan participant and therefore, the designations, whether made by instrument or by will, are testamentary. It followed Mak (Estate) v Mak[6] on this point. Further, it stated that if Ms Roberts had made the designation by will, no presumption of resulting trust could arise, for she would be presumed to have intended the benefit (assuming capacity and lack of undue influence). And there was nothing in s 71 to indicate that a designation by instrument should be treated differently.

Second, the benefit conferred by designation of beneficiary differs from an inter vivos transfer. The presumption of resulting trust applies to the latter but not to the former, since the designation does not give the beneficiary any rights while the plan’s participant is living. Indeed, the latter can revoke the designation at any time and therefore the designated beneficiary does not hold any interest in trust for the plan participant.

Third, the beneficiary’s interest is only enforceable on the death of the plan participant.

In fact, said the court, the beneficiary designation itself was direct objective evidence of Ms Robert’s intent to benefit Peggy. She fully understood the nature and effect of the beneficiary designation. Moreover, there was evidence that Peggy had provided financial assistance to her mother for which she had not sought reimbursement, so it was reasonable to draw an inference that she wanted to compensate Peggy for her financial assistance and for her help in general while she lived.

4. Expenses Incurred by Personal Representatives

The executors claimed payment for all expenses incurred by them in the administration of the will. The court assessed the claim, found it be reasonable, and directed that it be paid from the estate.

[1]    E.g., Re Dreger Estate, 1994 CarswellMan 89 (CA); Calmusky v Calmusky, 2020 ONSC 1506.

[2]    Nelson v Little Estate, 2005 SKCA; Mak (Estate) v Mak, 2021 ONSC 4415; Fitzgerald v Fitzgerald Estate, 2021 NSSC 355.

[3]    2021 ABQB 945, 72 ETR 4th 206.

[4]    2015 ABQB 769.

[5]    SA 2010, c W-12.2.

[6]    Footnote 2, supra.

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