By Lucinda Main, Partner, and Jessica DeFilippis, Student-at-Law, Beard Winter LLP
A recent decision from the Ontario Superior Court of Justice, Calmusky v Calmusky, 2020 ONSC 1506, has muddied the waters and is already causing confusion and concern for estate planners, family law lawyers and financial institutions.
Henry Calmusky died in 2016 with two surviving children: twin sons Randy and Gary. Soon after his wife’s death in 2014, Henry altered financial arrangements regarding specific assets and revised his Will. His new Will named both Randy and Gary as co-executors of his estate and divided the residue of the estate equally between a nephew and one of Randy’s three children.
The assets in question included joint bank accounts situated at two different banking institutions held in the joint names of Henry and Gary with a right of survivorship, and a registered Retirement Income Fund (RIF) held in Henry’s name, of which Gary was the designated beneficiary.
Once Henry passed away, Randy, in his capacity as a co-executor, brought forth an application that questioned entitlement to those financial assets. Specifically, Randy claimed that Gary held the proceeds of the bank accounts and RIF in trust for the estate. On the other hand, Gary claimed that he was entitled to the jointly held funds by way of survivorship and the RIF as the designated beneficiary.
Jointly held funds
The Court first turned its analysis to the jointly held funds and ruled in favour of Randy in determining that the proceeds belonged to the estate. Their decision was based on the seminal Supreme Court of Canada case Pecore v Pecore, 2007 SCC 17, which provided that a gratuitous transfer of assets from a parent to an adult child creates the presumption of a resulting trust and, therefore, a presumption that the transferee holds the assets as trustee for the transferor.
The application of this presumption required Gary to demonstrate, on a balance of probabilities, that Henry actually intended the transfer to be a gift to him personally. In an attempt to meet this burden, Gary provided – among other details – banking instruments signed by Henry confirming that the accounts carried a right of survivorship and testimony of bank employees who met with Henry at the time and who informed him of the respective effect that the revised banking arrangements would have in terms of the distribution of the assets on death.
The Court however was not persuaded that the evidence demonstrated a clear intention on the part of Henry that the jointly held funds were meant to be a gift to Gary personally. As such, it was held that Gary was not entitled to the funds by way of survivorship and instead the funds were to flow to the estate. The result is not overly surprising.
Retirement income funds
Most unanticipated was the Court’s determination that the principles in Pecore were to also be applied when analyzing entitlement to the RIF. The Calmusky Court provided that the Pecore principles surrounding the presumption of a resulting trust are not meant to be applied narrowly and instead, apply more generally to other gratuitous transfers of property. In coming to this determination, R.A. Lococo J. stated that there would be “no principled basis” to apply the presumption to the gratuitous transfer of jointly held funds but not to a RIF beneficiary designation.
Likewise, the application of the Pecore principles in this instance had the effect of placing a similar evidentiary burden on Gary, requiring him to provide evidence highlighting the circumstances of Henry’s intention.
Similar to the evidence adduced with respect to the joint bank accounts, Gary relied on the testimony of a bank representative and a signed one hundred per cent Designation of Beneficiary form to highlight Henry’s intention. However, for the same reasons set forth above, the Court did not find the evidence to be sufficient or conclusive proof that Henry intended Gary have beneficial ownership of the RIF. For those reasons, the value of the RIF was found to also form part of the estate.
Leave to appeal was not filed. We understand that the Ontario Bar Association has delivered submissions to the Ontario Attorney General and Finance Minister regarding the far-reaching impact of this decision. In their submissions, they set out how the decision runs counter to provincial legislation and could result in concerns regarding the use of insurance policies in family law matters to guarantee support payments and increased litigation after the testator’s death. The Ontario Bar Association has proposed specific legislative amendments to the Succession Law Reform Act and the Insurance Act such that there is no presumption of a resulting trust when there is a valid beneficiary designation.
Until and unless these legislative amendments are given effect, the decision must be of consideration for estate and family law practitioners and financial institutions going forward not only for RIF beneficiary designations but also Registered Retirement Savings Plans, Tax-Free Savings Accounts and personal life insurance beneficiary designations. The additional safeguards that may be required to protect one’s testamentary intentions with respect to such assets or to secure support payments in the family law context will have to be re-evaluated as a consequence of this decision.
This article originally appeared in Thomson Reuters’ Taxes & Wealth Management, April 2021 edition, and is reproduced with permission from the publisher.
Lucinda Main is a partner at Beard Winter LLP advising Canadian and international clients on a wide range of estate and trust matters. She earned her Trust and Estate Practitioner (TEP) designation from the international Society of Trust and Estate Practitioners (STEP) in 2013. Lucy joined the editorial board of Thomson Reuters’ Taxes & Wealth Management quarterly publication in 2019. She regularly presents at legal conferences including for STEP, CTF and American Bar Association. Lucy is recognized by Best Lawyers and Lexpert in the practice area of trusts and estates.
See our article “Four important recent life and health insurance decisions by Ontario Courts” which also discusses the Calmusky v Calmusky case.
Our experienced estate and trust planning lawyers are ready to assist you. Please contact Lucinda Main at email@example.com with questions or inquiries.
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