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Invesco Tax & Estate team | February 18, 2021

Resulting trusts and registered plan beneficiary designations

A recent court decision in Ontario may have far-reaching implications, raising questions about the outcome of registered plan beneficiary designations when the beneficiary is a financially independent adult child.


Something as straightforward as designating a beneficiary on registered plans (e.g., RRSPs, RRIFs and TFSAs) seems like it should require little thought and have an unambiguous outcome. However, a recent court case may have introduced a lot more uncertainty to the implications of beneficiary designations in Ontario.

Provincial and territorial legislation governs the designation of a beneficiary. Legislation such as Ontario’s Succession Law Reform Act, Insurance Act and Pension Benefits Act provides for the designation of a beneficiary on registered plans, as well as insurance contracts. Beneficiary designations under the Pension Benefits Act are subject to the provisions of the Succession Law Reform Act.

An accountholder generally makes a beneficiary designation on the application form supplied by the financial institution when the plan is established. The designation allows the assets to pass outside the accountholder’s estate and directly to the designated beneficiary(ies). Changes and updates to existing beneficiary designations are made on formal documents sent to the institution after the account is established. The beneficiary designation appoints the intended recipient(s) of proceeds from the plan at the death of the individual; therefore, the designation is “testamentary,” since it only takes effect at the time of death. When there is a designated plan beneficiary(ies), the value of the assets held in the account does not need to be included in the value of the estate in the probate application (where probate applies).

Generally, the Ontario courts endeavour not to interfere with a settlor’s intentions as to the distribution of his or her property after death. It has long been the popular belief that beneficiary designations on registered plans, including RRIFs, are clear evidence of the annuitant’s intention to bestow the plan proceeds on the named beneficiary at the time of the annuitant’s death. As a result, RRIF proceeds have historically passed to the named beneficiary without any question from the Ontario courts as to the intention of the deceased.

However, in a recent case, Calmusky v. Calmusky, 2020 ONSC 1506, the court ruled that a beneficiary designated on a RRIF was holding the assets in trust for the deceased RRIF annuitant. This case involved a court application following a dispute by one of the two adult sons, Randy, over the estate of his deceased father, Henry. During Henry’s lifetime, he designated his other son, Gary, as joint holder of his bank account and as the direct plan beneficiary of his RRIF. The bank account was held with a right of survivorship. After Henry’s passing, Randy disagreed that the assets held in both the joint account and the RRIF were to go to Gary, and argued that Gary was holding the assets in both accounts in trust for Henry’s estate.     

In line with disputes involving jointly held accounts with a parent and adult child(ren), the court considered the principles of “presumption of resulting trust” versus “presumption of advancement” to determine the entitlement of the jointly held bank account for the deceased and his adult child. The Supreme Court of Canada addressed these principles in a May 2007 ruling, Pecore v. Pecore, 2007 SCC 17, which followed a dispute over a father gratuitously adding his daughter as a joint owner to an investment account. The daughter had the onus to rebut the presumption of resulting trust. In other words, the daughter had to show that a transfer of beneficial ownership was intended as a gift on a balance of probabilities. Failing that, it would be presumed that the transfer was not a gift and was held by the daughter in trust for the father’s estate. This court case is important, as it eliminated the application of the presumption of advancement on gratuitous transfers from a parent to an adult child. From this point on, courts have turned to the presumption of resulting trust when determining cases involving the transfer from a parent to adult children.

Interestingly, when arriving at the decision on Henry’s RRIF, the principle in Pecore v. Pecore (i.e., resulting trust applies to gratuitous transfers from parent to adult child) was extended to the beneficiary designation on the RRIF. The application of the presumption of resulting trust was unconventional, as it generally applies to jointly owned banking or investment accounts. Gary was not successful in rebutting the presumption of resulting trust and was not able to establish that Henry intended that Gary be the recipient of the funds held in the RRIF. Consequently, it was determined that Gary was holding the funds in the RRIF in trust for Henry’s estate. This meant the RRIF assets would come under the control of the executor to be distributed through Henry’s will.

Although this is the first case of its kind in Ontario, courts in Alberta (Morrison Estate (Re), 2015 ABQB 769), Manitoba (Dreger (Litigation Guardian of) v. Dreger, 1994 CanLII 16643 (MB CA)) and British Columbia (Neufeld v. Neufeld, 2004 BCSC 25) have also applied the presumption of resulting trust to cases involving disputes over beneficiary designations under registered plans.

A closer look at the two presumption principles

Courts use the presumption of resulting trust and presumption of advancement to help them determine the intention of a transferor to a transferee when there is a gratuitous transfer (a transfer for no return of money where the recipient did not contribute or pay for it) and a third party challenges where the true ownership lies.

The judge has to consider whether to apply:

  • Presumption of resulting trust – the property is owned by the person who paid for it (i.e., the transferor) and was transferred into joint ownership for convenience only, so it should be part of the estate on the real owner’s death (similar to tenants in common); or
  • Presumption of advancement – the property was transferred into joint ownership because it was intended as a gift and should go directly to the other owner(s) through the right of survivorship

If the intent of the deceased regarding the jointly held asset in question is contentious, it is left to the court to review the evidence and decide on the intent of the deceased. These common law principles (i.e., the presumptions) guide those judgements. In some situations involving joint accounts, putting funds in joint name with someone other than a spouse may have negative consequences (in most provinces, the presumption of advancement applies to accounts held between spouses under joint tenancy). The potential for conflict may arise if an unhappy sibling or family member challenges the joint ownership and questions the true ownership of the funds after death. Beyond the deterioration of an otherwise harmonious family, this leads to a costly and lengthy court process to determine the intention of the deceased.

When the transfer is from a parent to a financially independent adult child(ren), there is a presumption of resulting trust. This is a rebuttable presumption (the court assumes it is true, unless disproved by evidence). As a result, the surviving joint owner must prove the transfer was intended to be a gift at the time he or she was added as a joint owner. The term “resulting trust” signifies that the adult child holds the property in trust for the estate unless the adult child can prove otherwise. This, of course, is challenging unless the deceased had the foresight to clearly document his or her intentions in some form.

Legislative proposals seek to clarify uncertainty

Calmusky v. Calmusky has apotential widespread impact on estate planning, especially for pre-existing beneficiary designation on registered plans such as RRSPs and RRIFs. Accordingly, the Ontario Bar Association issued a letter to the Attorney General of Ontario and the Minister of Finance in November 2020, raising awareness of the uncertainties and concerns resulting from this case. The Ontario Bar Association proposes changes to the legislation governing the making of a designation to specifically mention that the presumption of resulting trust does not apply to beneficiary designations under the Succession Law Reform Act, Insurance Act and Pension Benefits Act.

The decision in Calmusky v. Calmusky may be a counterintuitive application of the principle of resulting trust and no doubt is causing much consternation among estate practitioners. It is unclear whether the principle of resulting trust should apply to beneficiary designations. This case may open the door to challenges by disgruntled or unhappy heirs and may put an undue burden on individuals making the designation to make their intentions clear by way of documentation in the unlikely event the designation is challenged at a later date after death.

For more information on joint accounts, please refer to our Tax & Estate InfoPage “Joint Accounts” and our previous blog post “Resulting trusts and joint accounts”.

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The information provided is general in nature and may not be relied upon nor considered to be the rendering of tax, legal, accounting or professional advice. Readers should consult with their own accountants, lawyers and/or other professionals for advice on their specific circumstances before taking any action. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed.