Joint Accounts and Resulting Trusts: Pecore v. Pecore

Wills and estates — Joint bank and investment accounts with right of survivorship — Presumptions of resulting trust and advancement — Father gratuitously placing assets in joint accounts with daughter — Whether assets in joint accounts to be included in father’s estate upon his death — Whether presumption of resulting trust rebutted — Whether presumption of advancement applicable — Standard of proof applicable to rebut presumptions.

Wills and estates — Joint bank and investment accounts with right of survivorship — Presumptions of resulting trust and advancement — Father gratuitously placing assets in joint accounts with daughter — Evidence to be considered in ascertaining transferor’s intention — Whether evidence of intention that arises subsequent to transfer should be excluded.

Wills and estates — Joint bank and investment accounts with right of survivorship — Nature of survivorship in context of joint accounts.

Gifts — Gratuitous transfer from parent to child — Presumption of advancement — Whether presumption applies between mother and child — Whether presumption applies only to transfers made between parent and minor child.

An ageing father gratuitously placed the bulk of his assets in joint accounts with his daughter P, who was the closest to him of his three adult children. Unlike her siblings, who were financially secure, P worked at various low paying jobs and took care of her quadriplegic husband, M. P’s father helped P and her family financially, including buying them a van, making improvements to their home, and assisting her son while he was attending university. P’s father alone deposited funds into the joint accounts. He continued to use and control the accounts, and declared and paid all the taxes on the income made from the assets in the accounts. In his will, P’s father left specific bequests to P, M and her children but did not mention the accounts. The residue of the estate was to be divided equally between P and M. Upon the father’s death, P redeemed the balance in the joint accounts on the basis of a right of survivorship. P and M later divorced, and a dispute over the accounts arose during their matrimonial property proceedings. M claimed that P held the balance in the accounts in trust for the benefit of her father’s estate and, consequently, the assets formed part of the residue and should be distributed according to the will. The trial judge held that P’s father intended to make a gift of the beneficial interest in the accounts upon his death to P alone, concluding that the evidence failed to rebut the presumption of advancement. The Court of Appeal dismissed M’s appeal, but found that it was not necessary to rely on the presumption of advancement because the presumption is only relevant in the absence of evidence of actual intention or where the evidence is evenly balanced.

Held: The appeal should be dismissed.

Per McLachlin C.J. and Bastarache, Binnie, LeBel, Deschamps, Fish, Charron and Rothstein JJ.: The long standing common law presumptions of advancement and resulting trust continue to play a role in disputes over gratuitous transfers. These presumptions provide a guide for courts where evidence as to the transferor’s intent in making the transfer is unavailable or unpersuasive. They also provide a measure of certainty and predictability for individuals who put property in joint accounts or make other gratuitous transfers. The presumption of resulting trust is the general rule for gratuitous transfers and the onus is placed on the transferee to demonstrate that a gift was intended. However, depending on the nature of the relationship between the transferor and transferee, the presumption of advancement may apply and it will fall on the party challenging the transfer to rebut the presumption of a gift. The civil standard of proof is applicable to rebut the presumptions. The applicable presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities. [23 24] [27] [43 44]

In the context of a transfer to a child, the presumption of advancement, which applies equally to fathers and mothers, is limited in its application to gratuitous transfers made by parents to minor children. Given that a principal justification for the presumption of advancement is parental obligation to support dependent children, the presumption does not apply in respect of independent adult children. Moreover, since it is common nowadays for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs, there should be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of that parent’s affairs. The presumption of advancement is also not applicable to dependent adult children because it would be impossible to list the wide variety of the circumstances that make someone “dependent” for the purpose of applying the presumption. Courts would have to determine on a case by case basis whether or not a particular individual is “dependent”, creating uncertainty and unpredictability in almost every instance. While dependency will not be a basis on which to apply the presumption, evidence as to the degree of dependency of an adult transferee child on the transferor parent may provide strong evidence to rebut the presumption of a resulting trust.

With joint accounts, the rights of survivorship, both legal and equitable, vest when the account is opened. The gift of those rights is therefore inter vivos in nature. Since the nature of a joint account is that the balance will fluctuate over time, the gift in these circumstances is the transferee’s survivorship interest in the account balance at the time of the transferor’s death. The presumption of a resulting trust means in that context that it will fall to the surviving joint account holder to prove that the transferor intended to gift the right of survivorship to whatever assets are left in the account to the survivor.

The types of evidence that should be considered in ascertaining a transferor’s intent will depend on the facts of each case. The evidence considered by a court may include the wording used in bank documents, the control and use of the funds in the account, the granting of a power of attorney, the tax treatment of the joint account, and evidence subsequent to the transfer if such evidence is relevant to the transferor’s intention at the time of the transfer. The weight to be placed on a particular piece of evidence in determining intent should be left to the discretion of the trial judge.

In this case, the trial judge erred in applying the presumption of advancement. P, although financially insecure, was not a minor child. The presumption of a resulting trust should therefore have been applied. Nonetheless, this error does not affect the disposition of the appeal because the trial judge found that the evidence clearly demonstrated the intention on the part of the father that the balance left in the joint accounts was to go to P alone on his death through survivorship. This strong finding regarding the father’s actual intention shows that the trial judge’s conclusion would have been the same even if he had applied the presumption of a resulting trust.

Per Abella J.: The trial judge properly applied the correct legal presumption to the facts of the case. Historically, the presumption of advancement has been applied to gratuitous transfers to children, regardless of the child’s age, and there is no reason now to limit its application to non adult children. The argument that a principal justification for the presumption was the parental obligation to support dependent children unduly narrows and contradicts the historical rationale for the presumption. Parental affection, no less than parental obligation, has always grounded the presumption of advancement. Furthermore, the intention to have an adult child manage a parent’s financial affairs during his or her lifetime is hardly inconsistent with the intention to make a gift of money in a joint account to that child. Parents generally want to benefit their children out of love and affection. If children assist them with their affairs, this cannot logically be a reason for displacing the assumption that parents desire to benefit them. It is equally plausible that an elderly parent who gratuitously enters into a joint bank account with an adult child on whom he or she depends for assistance intends to make a gift in gratitude for this assistance. If the intention is merely to have assistance in financial management, a power of attorney would suffice, as would a bank account without survivorship rights. Accordingly, since the presumption of advancement emerged no less from affection than from dependency, and since parental affection flows from the inherent nature of the relationship not of the dependency, the presumption of advancement should logically apply to all gratuitous transfers from parents to their children, regardless of the age or dependency of the child or the parent. The natural affection parents are presumed to have for their adult children when both were younger should not be deemed to atrophy with age.

*source: Canlii

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