Recipient Son Fails to Displace Presumed Trust for Father’s Estate Assets

Mark Feigenbaum

It’s probably not a surprise to most people that many issues leading to estate litigation relate to whether or not someone was entitled to what they received from someone’s estate. When this occurs amongst family, it can lead to disputes that cause long-lasting family conflict. This is one of the reasons estate planning lawyers go to great lengths to emphasize the importance of proper estate planning.

In this week’s blog, we highlight a decision from the Ontario Superior Court of Justice that looks at how the courts address situations where a testator has multiple children but jointly owns assets with one, and what can happen to those assets when the parent passes away.

Joint bank accounts at issue after death of family patriarch

The facts leading to the issue before the court involved twin brothers (RC and GC). When their father, HC, passed away in 2016 at the age of 94, the brothers were his only surviving immediate family members.

HC’s estate had three assets of significant value. They included two joint bank accounts that were in both HC and GC’s names. Together, the accounts held close to $300,000. The third valuable asset was a Registered Income Fund (“RIF”) which had a value of $40,814 and had GC listed as its beneficiary. Finally, HC also had a home that GC was living in, as well as a car.

Not surprisingly, GC’s presence as an owner of the bank accounts and as a beneficiary of the RIF caused conflict with the other son, RC. RC’s position was that his father wanted GC to hold the assets in trust for the estate but that they should ultimately be divided between RC and GC. RC also wanted GC to pay for his occupation of their father’s home. It was GC’s opinion that the financial assets were intended to be left to him by their father.

HC wrote a will in 2014, two days after his wife passed away. That will named GC and RC as co-executors of the estate but left the residual benefits of the estate to extended family members other than GC and RC, who had been named as beneficiaries in previous wills.

While the validity of HC’s will was not in dispute, the litigation in this case centred on the reason why GC had been added to HC’s accounts. RC believed the changes to the accounts were made to protect RC’s struggling business from creditors, as he had experienced personal financial problems in the past. RC said the accounts were meant to eventually pass to him and his brother. However, GC believed his father’s intentions were for the accounts to be given solely to him upon his father’s death.

Recipient of gratuitous transfer bears onus of disproving presumed trust

The court’s analysis relied heavily on a 2007 decision from the Supreme Court of Canada. The decision states that “[w]here there is a gratuitous transfer of assets from a parent to an adult child (including a transfer of the parent’s funds into a joint account with the adult child), there is a presumption of resulting trust”.

This means that when a parent makes a large transfer to one of their children, the presumption is that a trust has been created rather than a gift. If a trust is created, the assets in question will revert back to the estate when the parent dies. In these situations, the child who received the gratuitous transfer has to convince the courts that it was intended to be a gift and that there should be no presumed trust.

In the present case, the court found that although HC knew what he was doing when naming GC a joint account holder and beneficiary, this did not mean that the accounts were to be gifted to GC. The court also noted that GC did not contribute to the funds held in the account, nor did he make any withdrawals from the account while HC was alive.

The court touched briefly on the will, which didn’t include any direction about what should happen to the accounts. The court said that while it was not necessary for HC to describe what he wanted to have happen to the bank accounts, his failure to do so presents some difficulty. Had HC addressed the accounts in his will, this whole matter may have been resolved without going to trial. Nevertheless, the court held that with the will being silent on the accounts, the only matter to determine was whether the funds should be treated as estate assets or whether they can be considered GC’s assets.

According to the court, GC seemed like an account holder in name only. As a result, the court ruled that he had not satisfied the onus of establishing that his father intended for him to be the sole beneficiary of the accounts.

Contact Feigenbaum Law in Toronto for Representation in Estate Litigation

At Feigenbaum Law, we recognize that estate litigation can be a highly difficult experience that causes emotional and financial stress for all involved. Spending unnecessary time in litigation can leave an estate financially depleted.

Mark Feigenbaum has years of experience in litigation as well as corporate law, tax law, and family law. His broad experience allows him to offer a uniquely comprehensive approach to wills and estates. Mark and his team will work to protect your interests as well as those of your family and your estate. Reach out at 877-275-4792 or online to schedule your initial consultation today.