Mak (Estate) v. Mak: Another turn in Ontario beneficiary designation precedent

The Estateably Team

Mak (Estate) v. Mak, 2021 ONSC 4415 was a summer decision by the Ontario Superior Court (ONSC) that conflicts with an earlier ONSC case, Calmusky v. Calmusky, 2020 ONSC 1506. The resulting decision in Mak ultimately leaves uncertainty to estate practitioners in how resulting trusts affect specific beneficiary designations. 

Facts

The facts of Mak tell the tragic tale of a family torn between the harsh battles of estate litigation. The Mak family, consisting of the Mother, Father, and four sons — Raymond, Eddie, Steve, and Kenny — emigrated to Canada from Hong Kong between 1970 and 1990. The Mother and Father purchased three residences between these 20 years as a primary home and as investments.

The Mother and Father executed their wills in 1994. The will left the properties to the surviving spouse and split the surviving spouse's estate equally between the four sons. The Father passed away in 2002.

Over the years, the family changed the ownership, state, and status of their three properties:

  • 1998: Parents transfer one of the properties to Steve and Kenny
  • 1998: Parents transfer another of the properties to Kenny
  • 2006: Mother sells the third property, the proceeds are put into a joint account with Mother and Kenny, and Mother provides each brother with $10,000 from the proceeds of sale
  • 2007: Mother lists Kenny as the beneficiary to her RRIF account
  • 2008: Another property is sold — proceeds are split between Mother, Steve, and Kenny equally

Additionally, in 2012, Mother showed symptoms of early-stage dementia. Her doctor continued to monitor the condition and recommended the family apply for a nursing home placement in 2014. At this time, Kenny was Mother's primary caregiver, and they remained in the same home until she died in 2015. 

Issues

The Mother's estate acts as the Plaintiff in this case, and Kenny acts as the Defendant. 

This case faced numerous issues related to whether Kenny took advantage of the Mother's mental incompetency and whether he held much of the assets for his own use or as a trustee for the estate. Kenny claimed Mother wanted him to take additional assets from her estate because he acted as her primary caregiver and had less education and no significant other, unlike his brothers. 

This case comment focuses on the RRIF beneficiary assignment and whether the RRIF assignment to Kenny by Mother in 2007 was subject to undue influence or a resulting trust. 

Superior Court Decision

RRIF (Registered Retirement Income Fund)

A registered retirement income fund is a contract between a person and a carrier such as a bank, trust company, or insurance company registered with the government. The contract involves transferring the assets of your registered retirement savings plan (RRSP) or other similar savings vehicle to the carrier in exchange for regular payments, generally in a person's retirement years. 

RRIFs usually have a registered beneficiary who receives the remainder of the RRIF's assets after the death of the original person. 

Undue Influence

Undue influence occurs when there's an imbalance of powers. As a result, one party has the opportunity to push another party to consent to something unwillingly. Generally, Courts will find consent in these situations void. In Canadian law, the presumption of undue influence arises in " inter vivos gifts involving a relationship of influence by a donee over the donor of a gift." In a testamentary gift, it is the burden of the plaintiff to prove the designation was due to undue influence. 

Raymond, one of the brothers, testified that Mother became dependent on Kenny to drive her to and from appointments and help with banking following Father's death. As a result, Mother's dependency on Kenny made her vulnerable to pressure from Kenny. This was why Mother named Kenny as the sole beneficiary of the RRIF account. 

The Court found that the RRIF designation was akin to a testamentary disposition and that the Plaintiff failed to establish the designation due to undue influence. As a result, the Court moved to the presumption of the resulting trust issue. 

Resulting Trust

A resulting trust is a legal doctrine that presumes when Person A transfers an asset to Person B for no consideration, Person B, although the legal owner, is holding the asset in trust for Person A. A typical scenario related to Mak is where an elderly parent transfers assets to their child to manage their banking affairs on their behalf. Although the adult child may be the legal owner of a property or bank account, they hold it in trust for their elderly parent.

The plaintiffs argued that the principle of resulting trust based on Pecore v. Pecore, [2007] SCJ No. 17 applies based on the decision in Calmusky. In Calmusky, the Court found the doctrine of resulting trusts applied to RRIF beneficiary designations. 

However, the Court in Mak felt there was "good reason to doubt the conclusion that the doctrine of resulting trust applies to a beneficiary designation." The Court noted how Pecore and subsequent cases have emphasized the doctrine only applied to inter vivos gifts, not testamentary ones like RRIF designations. They also stated the criticisms estate practitioners had with the Calmusky decision. Therefore, the Court ruled there was no resulting trust. 

As a result of the Plaintiff's failure to establish an undue influence or a resulting trust, the Court found that the Plaintiffs failed to prove their entitlement to the RRIF. 

Analysis

Mak leaves uncertainty in the air. If this case is appealed to the Ontario Court of Appeals (ONCA), it's an opportunity to clarify whether the Ontario legal system wants to follow Calmusky or Mak. However, until the ONCA decides on Mak or another case related to the presumption of resulting trusts related to RRIFs, Ontario estate administrators and practitioners do not have a straightforward answer to whether resulting trusts apply in this instance. 

This uncertainty creates issues for anyone preparing for estate litigation. Counsel for defendants and plaintiffs will have a hard time explaining to clients their chance of success, as there are now two ONSC decisions that conflict significantly. 


The Estateably Team
Estateably is the modern, cloud-based software solution for estate and trust professionals. We help over 300 firms save over 5 hours per file by automating the filling of court forms and precedent letters, simplifying input of estate inventory and accounting and enabling one-click court-formatted reporting. The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only.

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