By John Delaney and Ted Crane
Pecore v. Pecore, 2007 SCC 17
Madsen Estate v. Saylor, 2007 SCC 18
Supreme Court of Canada
Decisions delivered: May 3, 2007
The Supreme Court of Canada has recently released its decisions in the companion cases of Pecore v. Pecore and Madsen Estate v. Saylor.
Both cases were appeals from the Ontario Court of Appeal. The decisions provide clarity and guidance to the judicial application of the presumptions of resulting trust and advancement in considering the effect of gratuitous transfers of bank and investment accounts from a parent into joint names with a child.
In Madsen Estate a father named an adult daughter a joint account holder. The accounts had a right of survivorship. The daughter was the attorney under his power of attorney and the executor of his will. The fatherretained control of, and paid all taxes related to, the accounts. The accounts were used for his sole benefit during his life. Under his will the father’s three children were to share his estate. The daughter did not include the joint accounts as part of the distribution of his estate. The other children sought the inclusion of the accounts in the father’s estate. The trial judge stated that the presumption of advancement from a father to a child should be abandoned in favour of the presumption of resulting trust other than in exceptional cases. Accordingly the trial judge applied the presumption of resulting trust, which the daughter was unable to rebut. The accounts were included in the father’s estate. The majority of the Court of Appeal found that the trial judge erred in applying the presumption of resulting trust and should have applied the presumption of advancement. However, the Court of Appeal found that there was no need to consider either presumption because the intention of the father at the time of transfer clearly demonstrated that the accounts were to be included as part of the estate. There was therefore no reason to interfere with the trial judge’s decision.
In Pecore a father named an adult daughter a joint account holder. She, unlike her siblings, was not financially secure. She and her disabled husband received financial assistance from the father during his life. The father retained control of, and paid all taxes related to, the accounts. His will provided for specific gifts to the daughter, her husband and her children and the residue to be split between the daughter and her husband. The daughter did not include the jointly held accounts in the estate distribution. The daughter and her husbandseparated and fought over the accounts during their family property proceedings. The trial judge applied the presumption of advancement, which the husband was unable to rebut. The Court of Appeal dismissed the husband’s appeal finding 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. The Supreme Court of Canada considered the state of the presumptions of resulting trust and advancement in disputes over gratuitous gifts in Canada. The continued role of the presumptions was confirmed. They are however, only to be used as a guide when the intention of the transferor is unclear. Subject to the relationship between the parties a presumption of resulting trust is the general rule for gratuitous transfers. The onus is on the transferee to demonstrate a gift was intended. If the relationship is one of parent and child then the presumption of advancement applies and the person challenging the transfer has the onus of rebutting the presumption that a gift was made. The presumption of advancement applies equally to fathers and mothers as transferors but is limited in its application to gratuitous transfers made to minor children, and does not apply to transfers to independent or dependent adult children.
The court’s lengthier legal analysis is set out in Pecore. The Supreme Court of Canada considers the rationale behind the presumptions, the applicable standards of proof and the types of evidence that should be considered in ascertaining a transferor’s intention. No evidence is necessarily determinative on its own, however the court confirmed that it may consider the wording used in bank documents, control and use of the funds in the accounts, granting of a power of attorney, tax treatment of the joint accounts and evidence subsequent to the transfer if the evidence is relevant to the transferor’s intention at the time of the transfer. Weight to be place on any evidence in determining intention is left to the discretion of the trial judge.
The Supreme Court of Canada dismissed the appeals in both cases.
Joint bank and investment accounts are used routinely by Canadians, frequently as estate planning tools. There is often a misunderstanding by transferors and transferees as to the legal effect of the transfers. There is not always clear evidence of the intention of the transferor at the time of the transfer. Tax implications of transfer are often overlooked. In Pecore the father wrote letters to the financial institutions 2 years after the transfer to confirm that he intended to retain the beneficial ownership of the accounts notwithstanding the transfers into joint names with his daughter. He only did this after his accountant advised him that the transfers could give rise to tax consequences.
These companion decisions are important for all estate planning practitioners and should provide some certainty to the court’s consideration and treatment of gratuitous transfers from parents to children.
This case comment was originally published in “Headnotes and Footnotes”, for the Manitoba Bar Association. It was valid and accurate as of the date it was submitted. © John Delaney 2007.