A reality of modern estate planning is that lawyers and their clients must be aware of the Resulting Trust, which applies when a parent gratuitously transfers his or her assets to an adult child.
A resulting trust means that the person who received the transfer of the item holds it in trust for the person who made the transfer. In other words, the person who made the transfer retains beneficial ownership of the transferred item because he or she did not receive anything in return for its transfer.
In the case of a gratuitous transfer, a rebuttable presumption of resulting trust applies when the transfer is challenged. The court must then commence the inquiry with the presumption, weigh all the evidence, and attempt to determine the actual intention of the transferor. The presumption of resulting trust determines the result only where there is insufficient evidence to rebut the presumption on a balance of probabilities.
The courts in British Columbia have found that the presumption of a resulting trust applies in the following circumstances:
- Beneficiary Designations: The courts in British Columbia have held that the presumption of resulting trust applies to beneficiary designations under RRSPs, RRIFs and insurance policies (for example): Neufeld v. Neufeld Estate, 2004 BCSC 25.
- Gratuitous Transfers of Land: In British Columbia, the courts have determined the presumption of resulting trust applies to transfers of real property from parents to adult children: Fuller v. Fuller Estate, 2010 BCCA 421, Stade Estate (Re), 2017 BCSC 2354, Pavlovich v Danilovic, 2019 BCSC 153.
- Joint Accounts: The presumption of resulting trust applies to financial accounts in which a parent and adult child are the joint owners: Williams v. Williams Estate, 2018 BCSC 711, Simard v Simard Estate, 2021 BCSC 1836.
As noted, the courts have placed emphasis on the intention of the transferor in determining whether a resulting trust applies in the circumstances. The intention of a person who transfers property gratuitously can be difficult to determine, particularly when the transferor is deceased. In Pecore, the Supreme Court of Canada set out a non-exhaustive list of factors for a Court to examine:
- Evidence of the deceased’s intention at the time of the transfer: including evidence subsequent to the transfer (as long as it is relevant to the intention at the time of transfer).
- Bank documents: the clearer the wording in the bank documents as to the deceased’s intention, the more weight that evidence may attract.
- Control and use of the funds in a joint account: the circumstances must be reviewed and considered to determine the weight to be given to this factor since control can be consistent with an intention to retain ownership, yet it is also not consistent with an intention to gift the assets in certain circumstances.
- Granting a Power of Attorney: the court should consider whether a power of attorney is evidenced, one or another, of the deceased’s intention.
- Tax treatment of joint accounts: this is another circumstance which might shed light on the deceased’s intention as, for example, a transferor may have continued to pay taxes on the income earned in the joint account since they intended the assets to form part of their estate.
Several cases have also turned on the testimony of drafting lawyers, notaries, financial and investment advisors, and bank tellers with respect to the deceased’s intention at the time a transfer is made, or the joint bank account is opened.
The British Columbia case law regarding resulting trusts is a good reminder for all of us that, if we intend to take a gift (whether that is gift of survivorship of a real property, bank accounts, or insurance proceeds, RRSP, RRIF, etc.), it is vital to document that intention officially. If the intention is for the beneficiary to hold the assets for others, then that intention should be documented as well.
It is highly recommended that people consult with estate practitioners to make their intentions expressly known and to have the professionals guide them through the steps to make a valid and legally binding gift if a gift is indeed intended. These proactive steps will ensure that the person’s wish is followed after he or she is no longer able to testify as to his or her intention.
If you are considering updating your estate planning documents, or are seeking more information on how resulting trusts may apply to your estate, please contact Everson Law and one of our lawyers will be happy to assist you.
 The presumption of resulting trust applies to gratuitous transfers between parents and adult children. The presumption of advancement is still applicable between parents and minor children.