Does The "Presumption Of Resulting Trust" Apply To Beneficiary Designations?

• Published date: 01 November 2022
• Subject Matter: Litigation, Mediation & Arbitration, Family and Matrimonial, Trials & Appeals & Compensation, Wills/ Intestacy/ Estate Planning
• Law Firm: Borden Ladner Gervais LLP
• Author: Mr Scott Kerwin and Les Honywill

Since the decisions of the Supreme Court of Canada in Pecore v. Pecore, 2007 SCC 17 and Madsen Estate v. Saylor, 2007 SCC 18, the "presumption of resulting trust" has taken a leading place in estate litigation in Canada. It is common for persons interested in an estate to make claims that assets jointly owned by the Deceased and a third person (often an adult child) actually belong to the estate, and do not pass by right of survivorship to the other co-owner. The presumption of resulting trust is rebuttable, and the court will consider whether the Deceased actually intended to make a gift of the property (or the right of survivorship) to the third party.

Such claims are most prominent in British Columbia since assets passing outside the estate by right of survivorship are not subject to wills variation claims. Claimants often combine a Pecore claim with a wills variation claim in order to increase the size of the estate subject to the dispute.

Assets such as Registered Retirement Savings Plans (RRSP) and Tax-Free Savings Accounts (TFSA) also pass outside the Deceased's estate if a beneficiary has been designated. This point is codified in section 95 of the Wills, Estates and Succession Act (WESA). As such, these assets would not be subject to a wills variation claim.

There remains some confusion in the case law, particularly in British Columbia, as to whether the principles from Pecore apply to beneficiary designations. In short, does the presumption of resulting trust apply?

Current law in British Columbia

The Supreme Court of British Columbia has answered this question in the affirmative. This line of authority dates back to Neufeld v. Neufeld, 2004 BCSC 25 in which the Court followed the Manitoba Court of Appeal decision in Dreger (Litigation Guardian of) v. Dreger, [1994] 10 W.W.R. 293, which in turn relied upon earlier U.K. authorities dealing with insurance policies. The Court in Neufeld held that the deceased had designated her brother as a beneficiary of her Registered Retirement Income Fund (RRIF) for the purpose of reducing probate fees and taxes, and not as a gift, and the proceeds were therefore held upon a resulting trust for the estate.

Such an approach has been consistently followed by the Court: Re Stade Estate, 2017 BCSC 2354; Williams v. Williams Estate, 2018 BCSC 711. In the recent case of Simard v. Simard Estate, 2021 BCSC 1836, the Pecore analysis was again applied to RRIFs and a TFSA with designated beneficiaries. The Court noted...