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Estate Planning and Changing Family Dynamics

1. Introduction

Mong Alter Ego Trust No 1 v Yip[1] is an important case, not so much because of what it decides, which is unexceptional, but because it gives a detailed picture of estate planning that is complicated by changing family dynamics. In that respect it provides a useful story that estate planners were wise to read and learn from. But it also provides a fulsome review of the law of resulting trusts and the presumption of resulting trust, as well as of the law of inter vivos gifts, the right of survivorship, alter ego trusts, and certainty of subject matter. It that respect it serves as a useful aide memoire of what we must consider in developing and monitoring an estate plan for our clients. It would be supererogatory of me to summarize that discussion in this blog since the Madame Justice Watchuk explains the law clearly in her reasons. The reasons are very long, but they are very well-written and constitute a sound disquisition of these topics. Since several of the parties have the same last name, I shall refer to them by their first names without meaning any disrespect.

2. Facts

The Mong family, composed of the parents, Jeffrey and Hilda, and their three children, Jennifer, Michael, and Angela, emigrated from Hong Kong to Canada in 1967 and settled in Vancouver. The parents purchased 608 West 54th Avenue (the ‘608 Property’) and lived in it until 1986. It was purchased with Hilda’s money, but both took title. Jeffrey continued to manage his business in Hong Kong and spent time with his family in Vancouver several months each year. In 1979 Jennifer moved back to Hong Kong to work for Jeffrey and she lived with him there since 1981. In 1986 the parents purchased another house on Angus Drive in Vancouver (‘the Angus Property’). Initially, title was registered in the names of Hilda and Michael as tenants in common, but in 1987 Hilda and Jeffrey transferred the title to Hilda and Michael as joint tenants, and Hilda and Jeffrey transferred title to the 608 Property to Hilda and Jennifer as joint tenants.

Jeffrey and Hilda made their first will in 1970. It left their assets to each other and on the death of the survivor it left 50% to Michael and 25% to each of Jennifer and Angela. They made their second will in 1987. Again, they left their estates to each other but on the death of the survivor to Michael.

Jennifer married Thomas Yip in the 1980s. They had two children. After the second child was born in the 1990s, Jeffrey opened a Joint Account in the names of himself and Jennifer, but Hilda and Michael were given full powers of attorney over the account. The account was transferred to different institutions over time, but eventually it was transferred to BMO.

In 1987 the family had concerns about Angela’s relationship with her then partner. They had similar concerns about Michael’s proposed marriage, so he transferred his interest in the Angus Property back to Hilda. Angela was married in 2002. Each of Angela and Michael also had two children.

Jeffrey died suddenly in 1997 and Jennifer then transferred the funds from the joint account with her father into a joint account with Hilda.

In 2002 Hilda made her last will. In it she left five-tenths of her estate to Michael, three-tenths to Jennifer, one-tenth to Angela, and one-tenth to the grandchildren. She named Michael her executor. In 2007 Hilda visited Hong Kong for the last time and that was the last time she saw Jennifer. Hilda then added Michael back as a joint tenant on the Angus Property. She also withdrew $640,000 from the joint account and deposited the amount into accounts for Michael’s two children.

In 2009 Hilda became a client of Nicholas Smith for estate planning purposes. In that year, she signed an Alter Ego Trust including a declaration of trust for the 608 Property and named Michael as the Trustee. Michael signed also declarations of trust for the assets he held as joint tenant with Hilda. However, Jennifer did not sign a declaration of trust for the 608 Property. The Trust gave three-tenth to Jennifer, five-tenths to Michael, one-tenth to Angela and one-tenth to the grandchildren (a chart at paragraph 33 lists the amount for the grandchildren as three-tenths, but that must be an error). The Trust also gave Michael the Angus Property and other assets, and it gave one-half of the 608 Property to each of Jennifer and Angela.

In 2014 Hilda added the Joint Account and other accounts to the Trust. She reduced Jennifer’s share to one-tenth and increased the grandchildren’s share to three-tenths.

In 2010 Hilda made two transfers ($1,191,868.57 and $714,774,65) from the Joint Account to accounts in her sole name.

Hilda died in 2017. Her estate was then worth approximately $15.8 million, including the value of the 608 Property ($7.2 million) and the Joint Account (about $3.7 million). Jennifer took the position that she held the beneficial interest in the 608 Property and the Joint Account, which she held jointly with Hilda and which had been transferred into the Trust. Michael therefore brought this action as Trustee of the Trust for declarations that Jennifer held legal title to those assets as bare trustee for the Trust and that the Trust was their sole beneficial owner. Jennifer counterclaimed against Michael in his personal capacity and as executor of Hilda’s estate claiming that he unduly influenced Hilda, and damages for breach of trust, restitution, and unjust enrichment. The claim in undue influence was withdrawn during the trial. Moreover, the capacity of Hilda was not in issue.

The parties were also involved in litigation in Hong Kong with respect to Hong Kong assets, but they asked that Justice Watchuk not make any findings of fact concerning those assets, since they would be determined by the Hong Kong court.

3. Analysis

Madame Justice Watchuk began her analysis by assessing the credibility of Michael and Jennifer. After considering all the evidence, she concluded in paragraph 225 that Michael was a wholly credible and reliable witness and accepted his evidence in its entirety. However, in paragraph 225 she concluded that Jennifer’s evidence about the intention of Jeffrey and Hilda and the statements they made to her was not credible and could not relied upon.

Having earlier concluded in her discussion of the law that the onus was on Jennifer to prove that the transfers to her of interests in the 608 Property and the Joint Account were gifts, she found that when Hilda transferred the title to the 608 Property into their joint names, Hilda only transferred the legal title and intended to retain the beneficial interest in what she considered throughout to be her property. The fact that Michael returned his interest in the Angus property to Hilda in 1986 confirmed that Hilda only intended to transfer the legal title to her children. The parents’ intention in this regard was motivated in part by the marriages or pending marriages of their children and the possibility that the family assets might be dissipated if any of them divorced their spouses. Justice Watchuk came to a similar conclusion with respect to the Joint Account. In her view, it was not logical to suppose that Jeffrey intended that Jennifer inherit almost his entire estate, or that he intended to disinherit his other two children. In her view, the more probably explanation was that it was the practice of Jeffrey and Hilda to put their children on title of their assets with the understanding that all the assets belonged to the family no matter who was on the title. Although Jennifer was named the primary account holder of the Joint Account and the interest was credited to her, this was done so that she would be treated as a non-resident for income tax purposes only. Thus, based on all the evidence Justice Watchuk found that Hilda did not intend to make a gift of the assets to Jennifer but that she (Hilda) held the beneficial interest of the Joint Account from the time it was opened. This meant that Jennifer held the 608 Property and the Joint Account upon resulting trust for Hilda. Therefore, Hilda was perfectly within her rights to transfer those assets into the Alter Ego Trust.

Justice Watchuk quickly disposed of the argument that the Alter Ego Trust failed for lack of certainty of subject matter. Since the trust property always belonged to Hilda and Jennifer failed to rebut the presumption of resulting trust, there was no uncertainty of subject matter.

She also held that Michael’s action regarding the Disputed Assets was not barred by limitation or by acquiescence or laches.

Consequently, she ordered that Jennifer held her legal title to the 608 Property as bare trustee for Michael in his capacity as Trustee of the Alter Ego Trust. She also ordered that Michael as Trustee was the sole beneficial owner of the funds in the Joint Account. And she dismissed Jennifer’s counterclaim.

[1]           2022 BCSC 1327.


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