Presumptions of Trust in Transfers: Parents, Children, Spouses, Study Guides, Projects, Research of Law

Download Presumptions of Trust in Transfers: Parents, Children, Spouses and more Study Guides, Projects, Research Law in PDF only on Docsity! ESTATE LITIGATION: A PRIMER TRUSTS AND ESTATES LAW / YOUNG LAWYERS DIVISION Joint Assets & Resulting Trusts: A Recipe for Litigation? Dealing with Joint Assets in the Estates Litigation Context Pia Hundal, Eisen Law 1 Joint Assets & Resulting Trusts: A Recipe for Litigation? Dealing with Joint Assets in the Estates Litigation Context Pia Hundal, Eisen Law A. Introduction Many estate litigation matters concern disputes regarding the beneficial ownership of joint assets, after the death of a title holder. In this paper, I set out the basic principles behind joint asset disputes in Ontario, as well as provide a review of the case law to date. Specifically, I address:  Unravelling the presumption of advance & the presumption of resulting trust.  Rebutting the presumptions.  When the presumptions apply: assets gratuitously transferred to children versus assets transferred between spouses.  Evidentiary considerations and joint accounts versus real property. B. The Presumption of Advancement & the Presumption of Resulting Trust Legal ownership The doctrine of resulting trusts arises out of equity. Equity recognizes a distinction between legal ownership and beneficial ownership. Legal ownership or legal title refers to property held in the name of a person or persons.1 Beneficial ownership Beneficial ownership is actual ownership is “described as ‘[t]he real owner of property even though [the property] is in someone else’s name’”.2 1 Pecore v Pecore, 2007 SCC 17, 2007 CarswellOnt 2752 [Pecore], (WL Can) at para 4, citing Cask v Aumon (1990), 69 DLR (4 th ) 567 (Ont HC) at 570. 2 Ibid. 4 Gratuitous Transfers between Spouses Historically, wives were afforded the benefit of the presumption of advancement for gratuitous transfers from their husbands. This changed with the introduction of reforms to the matrimonial property legislation in Canada11, beginning with Ontario in 1975.12 In Ontario, the Family Law Act13 sets out the regime for the division of property between spouses on the breakdown of a marriage (including death) and accordingly, the presumption of advancement is of no effect.14 The rationale in the jurisprudence that an unjust enrichment or other equitable claim will “in the vast majority of cases” be “fully addressed the operation of the equalization provisions under the Family Law Act”.15 The Family Law Act provisions relating to property division on marriage breakdown does not extend to common law spouses. However, common law spouses do not get the benefit of the presumption of advancement for gratuitous transfers.16 Gratuitous Transfers from Parents to Children In Pecore, Rothstein J. stated that the presumptions continue to play a role in resolving disputes around gratuitous transfers. He found that presumption of resulting trust is the general rule for gratuitous transfers from a parent to an adult child and that the presumption of advancement applies to gratuitous transfers to a minor child.17 It is worth noting that with respect to adult children, Rothstein J. rejected the notion that dependant, adult children should have the benefit of the presumption of advancement and accordingly, the presumption of resulting trust applies to all adult children.18 11 Waters, supra note 3 at 379: Waters et al suggest that the presumption of advancement is still of some effect in British Columbia, Manitoba and Alberta, but has “weakened” in its scope. This paper is limited to Ontario law. 12 Waters, supra note 3 at 379. 13 Family Law Act, RSO 1990, c F-3, Part I. 14 Waters, supra note 3. See also: Rathwell v Rathwell, [1978] 2 SCR 436, 83 DLR (3d) 289 at 304. 15 McNamee v McNamee, 2011 ONCA 533, 2011 CarswellOnt 7168 [McNamee], (WL Can) at para 66. See also: Martin v Sansome, 2014 ONCA 14; Korman v Korman, 2015 ONCA 578; and Murray v Bortolon, 2016 ONSC 5164. 16 Veitch (Trustee of) v Rankin, [1997] OJ No 4642, 41 OTC 14, 1997 CarswellOnt 4361 (CJ (Gen Div)) [Veitch], WL Can at para 33. 17 Pecore, supra note 1 at paras 38-40. 18 Ibid at para 40. 5 D. Joint Property with the Right of Survivorship In cases where the transferee can establish a gift where they obtain the property by the right of survivorship, the question of what is actually gifted can arise. Both Pecore and Sawdon Estate are instructive in these situations. With respect to joint bank accounts, Rothstein J. in Pecore found: “There may be a number of reasons why an individual would gratuitously transfer assets into a joint account having this intention. A typical reason is that the transferor wishes to have the assistance of the transferee with the management of his or her financial affairs, often because the transferor is ageing or disabled. At the same time, the transferor may wish to avoid probate fees and/or make after-death disposition to the transferee less cumbersome and time consuming. “Courts have understandably struggled with whether they are permitted to give effect to the transferor’s intention in this situation. One of the difficulties in these circumstances is that the beneficial interest of the transferee appears to arise only on the death of the transferor. ...I am of the view that the rights of survivorship, both legal and equitable, vest when the joint account is opened and the gift of those rights is therefore inter vivos in nature.”19 Gillese J.A. applied Rothstein J’s approach in Sawdon Estate. In that case, the deceased transferred his accounts into joint names with two of his five children and expressly told the two children that they were to share what was left in the accounts on his death with their siblings in equal shares. He subsequently drafted a will giving legacies to the five children and leaving the balance of his estate to the Watch Tower Bible and Tract Society of Canada [“Watch Tower”].20 19 Ibid at paras 20 Sawdon Estate v Watch Tower and Tract Society of Canada, 2014 ONCA 101, 119 OR (3d) 81, 2014 CarswellOnt 1274 [Sawdon Estate], (WL Can) at paras 2, 6-12 6 After the father died, the issue was whether the funds in the account belong to: a. The two adult children who had title to the accounts by right of survivorship; b. The deceased’s estate by virtue of a resulting trust in favour of the estate; or c. The deceased’s five children in equal shares.21 Gillese J.A. found that at the time of the transfer of the accounts into joint names, legal title immediately vested in the deceased and his two sons equally. However, the deceased created a trust. When the two sons became legal owners of the joint accounts on the death of their father, they became the only two legal title owners of the accounts, but they held the accounts in trust for themselves and their siblings in equal shares: “In legal terms, when the Bank Accounts were opened Arthur made an immediate inter vivos gift of the beneficial right of survivorship to the Children. Thus, from the time that the Bank Accounts were opened, those holding the legal title to the Bank Accounts held the beneficial right of survivorship in trust for the Children in equal shares”.22 E. Rebutting the presumptions Presumption of Advancement Both presumptions are rebuttable. The presumption of advancement may be rebutted by evidence that the transfer was not a gift. The burden is on the transferor to show – on a balance of probabilities - that the transfer was not a gift. Presumption of Resulting Trust The presumption of resulting trust places the onus on the recipient or transferee to prove – on a balance of probabilities - that a gift was intended by the transferor.23 In estates litigation, this can be particularly challenging because the transferor is dead.24 21 Ibid. 22 Ibid at para 67. 23 Sawdon Estate, supra note 20 at paras 57-58. 24 Usually a barrier to provide evidence.