This landmark case (Pecore v. Pecore, 2007 SCC 17) concerned the distribution of a father’s assets to his adult daughter. Two of his three children were financially secure but the third, Paula, had poor job security and was responsible for the care of her quadriplegic husband, Michael. Paula’s father placed most of his assets into joint accounts that he held with Paula.
In his will, the father left specific bequests to Paula and to Michael, as well as to Paula’s children. The residue of his estate was to be equally divided between Michael and Paula, but the assets in the joint accounts were not specifically mentioned in the will. Paula and Michael got divorced, and ownership of those assets became a point of dispute. Michael argued that the money in the accounts was not a gift to Paula, but remained part of the father’s estate and should be divided along with the rest of the estate.
When is resulting trust presumed?
In law, there is a presumption that when a person gives someone else their property without expecting anything in return, or the recipient is a fiduciary of the property owner, the recipient has not received the property as a gift but is just holding it in trust. This is called the presumption of resulting trust. The burden of displacing this presumption in court falls on the recipient of the property. There is an opposite presumption, the presumption of advancement, which is sometimes applied to transfers of assets from parents to children. At trial, the judge found that the presumption of advancement applied and that the evidence did not rebut that presumption. At the court of appeal, the judges found that there was ample evidence that Paula’s father had intended to give her the assets, so it wasn’t necessary to rely on the presumption of advancement.
The presumption of resulting trust or presumption of advancement?
The Supreme Court of Canada considered whether the presumption of advancement should apply to transfers from parents to their independent adult children, and concluded that it should not. The Supreme Court noted that some courts have held that the presumption of advancement should apply on the basis of parental affection for their adult children, but found that this is a factor to be considered in rebutting the presumption of resulting trust. Affection between adult children and their parents, the Court held, is not a basis for applying the presumption of advancement.
This decision marked a major change in Canadian law with respect to the presumption of resulting trust and the presumption of advancement. However, based on the evidence the Court found that the father in this specific case had clearly intended the balance left in the joint accounts to go only to Paula. In other words, Paula successfully rebutted the presumption of resulting trust.