1. Introduction
We have now had several cases dealing with the question whether the presumption of resulting trust applies to beneficiary designations. In Calmusky v Calmusky[1] Lococo J held that it applied to a beneficiary designation under a Registered Income Fund (RIF). However, in Mak (Estate) v Mak[2] McKelvey J held that it does not apply to a beneficiary designation under a Registered Retirement Income Fund (RRIF). And in Fitzgerald Estate v Fitzgerald[3] Murray J held that the presumption does not apply to a beneficiary designation under a Tax-Free Savings Account (TFSA). In the latter two cases the courts rejected the reasoning in Calmusky.[4] The issue was raised again in Dixon v Spencer[5] but did not have to be considered. Nevertheless, since this is a continuing ‘live’ issue, I think it appropriate to consider this case.
2. Facts
The Deceased was born in England but emigrated to Canada and died in 2018. Her husband predeceased her. She was survived by her four daughters, the Applicant Helen, and the Respondents Kirsty, Alexia, and Nicole. They were equal beneficiaries of the residue under the Deceased’s 2016 will. The Deceased named Helen, Kirsty, and Kirsty’s husband her executors.
In 1998 the Deceased’s husband arranged a ‘with-Profits Life Assurance Premier Investment Bond’ (the ‘Bond’), administered by Aviva Life & Pensions UK Limited (‘Aviva’) in the United Kingdom. When her husband died, the Deceased became the ‘Life Assured’ under the Bond. The Deceased’s Will made no reference to the Bond.
In 2011, by deed of assignment, the Deceased assigned the bond to Kirsty and Alexia and in it she confirmed that it was a gift made in consideration of natural love and affection. In the Schedule of New Policy Holders to the deed the Deceased named Kirsty and Alexia as ‘Policy Owners’ with her. The Applicant signed the deed as witness.
The income generated by the Bond was deposited into an Account at Lloyd’s Bank in the United Kingdom and the Deceased added Kirsty and Alexia as joint account holders. Since 2016 the payments on the Bond that were paid into the account were reinvested in the Bond.
In 2018 the Deceased wrote a letter to her daughters telling them that she had decided to make a monetary gift to Kirsty because she had been so helpful and caring to herself and previously to their father during the last years of his life. She said that this gift was in addition to the provisions in her Will. The gift consisted of the moneys in the Lloyd’s Bank Account and amounted to approximately £55,000. No party disputed this gift.
Aviva paid the proceeds of the Bond to Kirsty (who received them also on behalf of Alexia). They were not paid to the estate. Kirsty seems to have taken it upon herself to administer the estate. In 1919 she provided her sisters with an interim estate accounting. It did not include the Bond. The Applicant asked her about that, but Kirsty told her that the Bond moneys did not form part of the estate, and Nicole confirmed that. In 2021 Kirsty provided her sisters with the final estate accounting. It also did not include the Bond. The Applicant again queried why it was not, was told again that it was not part of the estate. Consequently, she refused to sign a Notice of No Objection to the accounting. Then she brought this application for the advice and direction of the court on the question whether the Bond was an estate asset, and for related relief.
The case therefore raised the question whether the Assignment of the Bond constituted an inter vivos gift and thus raised the principles discussed in Pecore v Pecore.[6] Alternatively the question was whether the assignment of the Bond constituted a beneficiary designation.
Kirsty and Alexia argued that the Bond was not a joint account but was a life insurance bond that consisted primarily of a payout of value on the death of the Deceased, who was the named ‘Life Assured’. They took the view that the assignment of the Bond into joint ownership was ‘akin to an irrevocable beneficiary designation’ in an instrument that it ‘akin’ to a testamentary gift that is activated on the donor’s death. Thus, they argued that the Bond was a ‘hybrid’ investment instrument with life insurance components that involved payment to the surviving policy owners and was similar to an irrevocable beneficiary designation, even though the Bond did not contain an express beneficiary designation. Nonetheless, they argued that there was no presumption of resulting trust but that the principles regarding beneficiary designations applied. They relied on Mak and Fitzgerald. In contrast, the Applicant argued that the assignment of the Bond was functionally comparable to a gratuitous inter vivos transfer from a parent to a child, even though the Bond was not activated until the death of the Deceased, and therefore that the presumption of resulting trust applied.
3. Analysis and Judgment
Justice Sanfilippo took the view that it was not necessary to determine whether the Bond was an inter vivos transfer or a ‘hybrid’ instrument similar to a testamentary gift. He also concluded that it was not necessary to determine whether the presumption of resulting trust applied to the assignment of the Bond. This was because Kirsty and Alexia could rebut the presumption of resulting trust by proving that the assignment was a gift.
His Honour concluded that the evidence strongly supported the view that the assignment was a gift and that the Deceased intended Kirsty and Alexia to have the proceeds as such. By reference to McNamee v McNamee[7] and Re Foley,[8] the court noted that three elements must be proved to establish a valid gift: (1) an intention by the donor to make a gift; (2) an acceptance of the gift by the donee; and (3) a sufficient act of delivery or transfer of the property to complete the gift.
That the assignment was a gift was confirmed by the Deed of Assignment itself, which stated that the assignment was by way of gift in consideration of natural love and affection. Further, the Applicant witnessed the Deed and was thus aware that the assignment was a gift. Her evidence to the contrary was unreliable and implausible. In contrast, the evidence of the other three sisters were unanimous in stating that the assignment was an unconditional gift, and that evidence included the evidence of Nicole who testified to the matter against her financial interest. In addition the 2018 gift served to confirm that the Deceased intended a gift. Moreover, (1) the Will made no reference to the Bond; (2) Kirsty had control over the asset and accessed the Bank account for payment of expenses with her mother’s knowledge; and (3) Kirsty had a close and supportive relationship with the Deceased and was one of her attorneys for personal care.
Therefore, Justice Sanfilippo concluded that the Bond was an inter vivos gift and that, even if the presumption of resulting trust was raised by the facts, Kirsty and Alexia rebutted the presumption.
Another issue raised by the Respondents was that the Applicant’s claim was barred by limitation and estoppel. Because of the conclusion Justice Sanfilippo reached, it was not necessary to decide these matters, although he did state that it would have failed on the facts.
4. Costs
On the issue of costs, his Honour fixed the costs of Kirsty on a partial indemnity basis and also award small amounts to Alexia and Nicole, who were self-represented, for expenses they had incurred, all to be paid by the Applicant. His Honour went on, under a blended costs order, to award costs to Kirsty on a full indemnity basis for the expenses she incurred as executor to be paid out of the estate.
With reference to McDougald Estate v Gooderham[9] and Sawdon Estate v Sawdon[10] Hi Honour denied costs to the Applicant. The policy considerations that would otherwise allow payment of costs from the estate: (1) the need to give effect to valid wills of competent testators; and (2) the need to ensure that estates are properly administered, were not applicable because, ad (1) the Application did not raise the validity of the Will; and ad (2) the Applicant acted unreasonably as a co-executor in bringing the Application but brought it in her own self-interest.
—
[1] 2020 ONSC 1506.
[2] 2021 ONSC 4415.
[3] 2021 NSSC 355.
[4] These cases have been referred to in other cases too. See, e.g., Re Stade Estate, 2017 BCSC 711; Williams v Williams Estate, 2018 BCSC 711, Simard v Simard Estate, 2021 BCSC 1836; Chung v Chung, 2022 BCSC 1396. In several of these the courts did apply the presumption of resulting trust to beneficiary designations.
[5] 2023 ONSC 202.
[6] 2007 SCC 17
[7] 2011 ONCA 533, para 24.
[8] 2015 ONCA 382, para 25.
[9] (2005), 255 DLR 4th 435 (Ont CA).
[10] 2014 ONCA 101, paras 84-85.
Menu
Written by: Albert Oosterhoff
Posted on: April 30, 2023
Categories: Commentary
1. Introduction
We have now had several cases dealing with the question whether the presumption of resulting trust applies to beneficiary designations. In Calmusky v Calmusky[1] Lococo J held that it applied to a beneficiary designation under a Registered Income Fund (RIF). However, in Mak (Estate) v Mak[2] McKelvey J held that it does not apply to a beneficiary designation under a Registered Retirement Income Fund (RRIF). And in Fitzgerald Estate v Fitzgerald[3] Murray J held that the presumption does not apply to a beneficiary designation under a Tax-Free Savings Account (TFSA). In the latter two cases the courts rejected the reasoning in Calmusky.[4] The issue was raised again in Dixon v Spencer[5] but did not have to be considered. Nevertheless, since this is a continuing ‘live’ issue, I think it appropriate to consider this case.
2. Facts
The Deceased was born in England but emigrated to Canada and died in 2018. Her husband predeceased her. She was survived by her four daughters, the Applicant Helen, and the Respondents Kirsty, Alexia, and Nicole. They were equal beneficiaries of the residue under the Deceased’s 2016 will. The Deceased named Helen, Kirsty, and Kirsty’s husband her executors.
In 1998 the Deceased’s husband arranged a ‘with-Profits Life Assurance Premier Investment Bond’ (the ‘Bond’), administered by Aviva Life & Pensions UK Limited (‘Aviva’) in the United Kingdom. When her husband died, the Deceased became the ‘Life Assured’ under the Bond. The Deceased’s Will made no reference to the Bond.
In 2011, by deed of assignment, the Deceased assigned the bond to Kirsty and Alexia and in it she confirmed that it was a gift made in consideration of natural love and affection. In the Schedule of New Policy Holders to the deed the Deceased named Kirsty and Alexia as ‘Policy Owners’ with her. The Applicant signed the deed as witness.
The income generated by the Bond was deposited into an Account at Lloyd’s Bank in the United Kingdom and the Deceased added Kirsty and Alexia as joint account holders. Since 2016 the payments on the Bond that were paid into the account were reinvested in the Bond.
In 2018 the Deceased wrote a letter to her daughters telling them that she had decided to make a monetary gift to Kirsty because she had been so helpful and caring to herself and previously to their father during the last years of his life. She said that this gift was in addition to the provisions in her Will. The gift consisted of the moneys in the Lloyd’s Bank Account and amounted to approximately £55,000. No party disputed this gift.
Aviva paid the proceeds of the Bond to Kirsty (who received them also on behalf of Alexia). They were not paid to the estate. Kirsty seems to have taken it upon herself to administer the estate. In 1919 she provided her sisters with an interim estate accounting. It did not include the Bond. The Applicant asked her about that, but Kirsty told her that the Bond moneys did not form part of the estate, and Nicole confirmed that. In 2021 Kirsty provided her sisters with the final estate accounting. It also did not include the Bond. The Applicant again queried why it was not, was told again that it was not part of the estate. Consequently, she refused to sign a Notice of No Objection to the accounting. Then she brought this application for the advice and direction of the court on the question whether the Bond was an estate asset, and for related relief.
The case therefore raised the question whether the Assignment of the Bond constituted an inter vivos gift and thus raised the principles discussed in Pecore v Pecore.[6] Alternatively the question was whether the assignment of the Bond constituted a beneficiary designation.
Kirsty and Alexia argued that the Bond was not a joint account but was a life insurance bond that consisted primarily of a payout of value on the death of the Deceased, who was the named ‘Life Assured’. They took the view that the assignment of the Bond into joint ownership was ‘akin to an irrevocable beneficiary designation’ in an instrument that it ‘akin’ to a testamentary gift that is activated on the donor’s death. Thus, they argued that the Bond was a ‘hybrid’ investment instrument with life insurance components that involved payment to the surviving policy owners and was similar to an irrevocable beneficiary designation, even though the Bond did not contain an express beneficiary designation. Nonetheless, they argued that there was no presumption of resulting trust but that the principles regarding beneficiary designations applied. They relied on Mak and Fitzgerald. In contrast, the Applicant argued that the assignment of the Bond was functionally comparable to a gratuitous inter vivos transfer from a parent to a child, even though the Bond was not activated until the death of the Deceased, and therefore that the presumption of resulting trust applied.
3. Analysis and Judgment
Justice Sanfilippo took the view that it was not necessary to determine whether the Bond was an inter vivos transfer or a ‘hybrid’ instrument similar to a testamentary gift. He also concluded that it was not necessary to determine whether the presumption of resulting trust applied to the assignment of the Bond. This was because Kirsty and Alexia could rebut the presumption of resulting trust by proving that the assignment was a gift.
His Honour concluded that the evidence strongly supported the view that the assignment was a gift and that the Deceased intended Kirsty and Alexia to have the proceeds as such. By reference to McNamee v McNamee[7] and Re Foley,[8] the court noted that three elements must be proved to establish a valid gift: (1) an intention by the donor to make a gift; (2) an acceptance of the gift by the donee; and (3) a sufficient act of delivery or transfer of the property to complete the gift.
That the assignment was a gift was confirmed by the Deed of Assignment itself, which stated that the assignment was by way of gift in consideration of natural love and affection. Further, the Applicant witnessed the Deed and was thus aware that the assignment was a gift. Her evidence to the contrary was unreliable and implausible. In contrast, the evidence of the other three sisters were unanimous in stating that the assignment was an unconditional gift, and that evidence included the evidence of Nicole who testified to the matter against her financial interest. In addition the 2018 gift served to confirm that the Deceased intended a gift. Moreover, (1) the Will made no reference to the Bond; (2) Kirsty had control over the asset and accessed the Bank account for payment of expenses with her mother’s knowledge; and (3) Kirsty had a close and supportive relationship with the Deceased and was one of her attorneys for personal care.
Therefore, Justice Sanfilippo concluded that the Bond was an inter vivos gift and that, even if the presumption of resulting trust was raised by the facts, Kirsty and Alexia rebutted the presumption.
Another issue raised by the Respondents was that the Applicant’s claim was barred by limitation and estoppel. Because of the conclusion Justice Sanfilippo reached, it was not necessary to decide these matters, although he did state that it would have failed on the facts.
4. Costs
On the issue of costs, his Honour fixed the costs of Kirsty on a partial indemnity basis and also award small amounts to Alexia and Nicole, who were self-represented, for expenses they had incurred, all to be paid by the Applicant. His Honour went on, under a blended costs order, to award costs to Kirsty on a full indemnity basis for the expenses she incurred as executor to be paid out of the estate.
With reference to McDougald Estate v Gooderham[9] and Sawdon Estate v Sawdon[10] Hi Honour denied costs to the Applicant. The policy considerations that would otherwise allow payment of costs from the estate: (1) the need to give effect to valid wills of competent testators; and (2) the need to ensure that estates are properly administered, were not applicable because, ad (1) the Application did not raise the validity of the Will; and ad (2) the Applicant acted unreasonably as a co-executor in bringing the Application but brought it in her own self-interest.
—
[1] 2020 ONSC 1506.
[2] 2021 ONSC 4415.
[3] 2021 NSSC 355.
[4] These cases have been referred to in other cases too. See, e.g., Re Stade Estate, 2017 BCSC 711; Williams v Williams Estate, 2018 BCSC 711, Simard v Simard Estate, 2021 BCSC 1836; Chung v Chung, 2022 BCSC 1396. In several of these the courts did apply the presumption of resulting trust to beneficiary designations.
[5] 2023 ONSC 202.
[6] 2007 SCC 17
[7] 2011 ONCA 533, para 24.
[8] 2015 ONCA 382, para 25.
[9] (2005), 255 DLR 4th 435 (Ont CA).
[10] 2014 ONCA 101, paras 84-85.
Author
View all posts