It is common for a parent to leave a will dividing their estate equally among their children. That was the case in Simard v. Simard Estate, 2021 BCSC 1836, where a mother’s will left the residue of her estate to be divided equally among her four adult children. The problem? Almost all of the mother’s assets had been transferred during her lifetime to only one of her four children. The other three children were essentially disinherited, despite the residue clause in the mother’s will. The three siblings relied on the presumption of resulting trust to challenge the transfers, with mixed success.
Facts in Simard Estate litigation
Maurice and Verna Simard were married for 47 years. Together they had four children: Karen, Tony, Julie, and Kathleen, who were born in that order between 1957 and 1963. Maurice died in February 2006. Verna was the sole beneficiary and executor of his estate. After his death, Verna and her daughter Julie became estranged from Tony, Karen, and Kathleen (the “Plaintiffs”). Each of the Plaintiffs testified to Julie’s near constant presence when they did see Verna prior to and during the breakdown of their relationships with their mother. Verna died in February 2018 at the age of 84. Verna’s last will, dated May 4, 2016, left the residue of her estate to be divided equally amongst all four children. Previous wills made by Verna were on essentially the same terms—all four children were to share equally in her estate.
Nothing in estate for beneficiaries of the will
While Verna was alive, she added Julie’s name to her bank accounts and investment accounts. She also transferred title to four properties to Julie. The primary issue was whether Julie held some or all of the assets she received from Verna before and after her death on a resulting trust for the estate. In a case such as this where there are multiple transfers, the same approach applies to each one: there is a rebuttable presumption of a resulting trust where a parent makes a gratuitous transfer of an asset to an adult child. The presumption only arises if the transfer was gratuitous (i.e., a gift, without consideration being paid), and the presumption will only determine the outcome where there is insufficient evidence to rebut it on a balance of probabilities.
Court’s decision on ownership of joint accounts and real property
These were the transfers that the Plaintiffs challenged, and the Court’s decision with respect to each disputed transfer:
- In 2007 Verna sold her home to Julie at below market value. Julie paid a purchase price of $225,000. The Plaintiffs argued a “fair” market value of $298,000 as determined by the property transfer tax notice of assessment. The Court held that the presumption of resulting trust did not apply to this transaction because the transfer was not gratuitous. The purchase price paid by Julie constituted consideration or value for the transfer of the property.
- In 2008 Verna opened an investment account with Pinnacle Wealth and named Julie as the sole beneficiary. There was $302,000 in the account when Verna died. The presumption of resulting trust applied, as Julie did not give any consideration or make contributions to the investment account. However, the presumption was rebutted. The Court was persuaded by the evidence that Verna did intend to gift the investments to Julie. Verna’s investment advisor provided evidence at trial. Her notes from meeting with Verna indicated that Verna told her she wished Julie to be the sole beneficiary of the Pinnacle Wealth account. Also persuasive was the beneficiary designation contained in the application form which Verna completed, identifying Julie as the beneficiary. The language of the designation was detailed enough to provide further evidence that Verna intended Julie to receive the balance in the investment account when she died, and it was consistent with the intention she expressed to her investment advisor during meetings.
- In 2009 Verna transferred three lots in Shawnigan, BC to Julie. The lots were worth approximately $500,000 when Verna died. These lots had been in Maurice’s family for many years and it was his dying wish that the properties stay as “family property.” Verna had to secure a line of credit against another property she owned to purchase the lots from Maurice’s brother, which she then transferred to Julie for $1 each. The Court held that the transfer of the lots was gratuitous, and the presumption of resulting trust applied. Julie did make some monthly interest payments of $500 to pay off interest on Verna’s line of credit. She also paid the property taxes on the lots. Despite that, Julie did not contribute something of value to Verna in exchange for receiving her legal interest in the lots. Julie contributed nothing to the principal on the debt Verna incurred, nor did she take on any of the financial risk. The other evidence on whether Verna intended to gift the lots to Julie outright was equivocal at best, and most came from Julie in the form of self-serving hearsay evidence. The Court found it difficult to reconcile an inter vivos gift of the property to Julie with Verna executing the 2016 Will; if her actual intention was to deprive the Plaintiffs of any inheritance, the equal division reflected nothing more than a shrewd if not cynical attempt to avoid a wills variation claim.
- Between 2015 and 2017 Verna added Julie as a secondary or joint account holder for her bank accounts and as the beneficiary of two RRIF accounts. Julie did not contribute or give consideration with respect to these transfers, so the presumption of resulting trust applied to each of these accounts. There are a number of reasons why an individual would gratuitously transfer assets into a joint account, including a wish to avoid probate fees and/or to make after-death disposition to the joint holder (see here on the right of survivorship). Another reason, however, is to permit the joint account holder to help with banking, and in that case, the question is whether the transferor truly intended to gift the right of survivorship. Verna had a stroke and there were concerns about her health and abilities around the time that Julie was added to these accounts. The Court found that Verna’s decision to add Julie was consistent with an immediate concern about her health and her ability to manage the accounts on her own. The Court was not convinced that Verna intended for Julie to own the balance in her bank accounts on her death. The presumption was not rebutted. Julie held the balances in these accounts on resulting trust for Verna’s estate.
Bottom line on bank accounts, property transfers, and the presumption of resulting trust
Where a gratuitous transfer of an asset from parent to adult child is challenged, the presumption of resulting trust arises. It falls to the surviving joint account holder or holder of title to real property to prove that the parent intended to gift the balance in the account or title to real property them at their death. Otherwise, the asset will be treated as part of the parent’s estate to be distributed according to their will.
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