Presumption of Resulting Trust #2
Palm Tree Justice Gone Wild
Just because you are the named Beneficiary of a RIFF or an Insurance Policy, you may not be
I refer our readers to an earlier blog article title presumption of resulting trust “When is an Owner of a Bank Account not an Owner?” To briefly summarize that blog article, if one is added as a joint bank account holder only as a banking convenience, upon the death of the other (usually the parent) the surviving adult child is not the real owner of that bank account.
This judge made law makes sense and is fair. However, after the Supreme Court of Canada decision in Precore, which reaffirmed the presumption of resulting trust, in this author’s view, the judicial train has fallen off the rails. In 2020, the Ontario Court of Appeal in the Kent v. Kent decision extended the presumption of resulting trust to real estate. In that case, a daughter’s name had been added to title to a property. This author can live with that view. The daughter would have been part of the process whereby she which would have been added on title. She would have been able to assemble and give evidence as a justification as to why the survivorship rules of joint tenancy should have applied and further a lawyer would have been involved in the process, who should have made notes.
But all of this comes crashing over the cliff with a series of decisions made across the country and most recently and most dangerously in Ontario by the learned Justice Richard Lococo in the Calmusky case.
All of these decisions are at the trial level and as such are only persuasive to other trial judges and not binding upon them. I describe all of this as palm tree justice gone wild. In the decision of Calmusky, the presumption of resulting trust was extended to a RIFF beneficiary designation. Further it was held that it applied to all beneficiary designations found or RRSP or Insurance policies. The learned justice treated that beneficiary designation as a transfer without consideration and placed the onus upon the beneficiary to prove that indeed was the intent of the person making that beneficiary designation. However, in this author’s view, there was no transfer until the parental owner of the RRSP died. The owner of a RIFF or RRSP or Life Insurance Policy (unless named as an irrevocable beneficiary) can always change that beneficiary designation. The presumption of resulting trust also places the onus on the beneficiary, the responsibility to explain and justify the beneficial intent of the parent. But what if the named beneficiary did not even know that they were so named? How can they be expected to produce this evidence?
In this author’s view, these string of cases are (A) a judicial gift to lawyers to find new things to fight over, (B) an example of palm tree justice gone wild. Palm tree justice is an undeclared tendency of some judges giving into their human nature in wanting to do the right thing. The facts direct the judge to a conclusion and then they find judicial justification. One can see this described in the off quoted adage “bad facts make bad law”.
The practical problems are mindboggling. One may have a Life Insurance Policy of a million dollars which was specifically arranged so as to (A). avoid it being subject to probate, (B) subject to probate tax and (C) avoid claims by creditors, all of these valid reasons being sabotaged by this justice gone wild concept when those assets are then dragged back into the estate and are governed by the terms of the Will. Every Will begins with the standard clause that the first obligation of an executor is to pay the debts of the estate before beneficiaries receive anything.
Hopefully an appeal decision will rectify this problem and that may take years if at all This author and many others believe that these string of cases are wrongly decided and a decision that would impact literally millions of beneficiary designations.
So what should one do? We urge our clients to head this problem off at the outset. Our office can prepare a declaration form in which the owner of the asset (RIFF, RRSP and Life Insurance Policy) can confirm that a beneficiary means a beneficiary and that this is not subject to the presumption of resulting trust and should not be treated as an asset of one’s estate.