In the recent case of Midtdal v Pohl, 2014 ABQB 646, the issue was whether or not a certain transfer gave rise to a resulting trust—nothing less than the family farm was at stake.
Gordon and Vivian were married in May 1974, two years after the death of Vivian's first husband. Vivian had five children by her first marriage, the oldest being Melva (the Defendant). At the time of his marriage to Vivian, Gordon owned six quarter sections of land he had purchased from his father. He eventually transferred title to the lands to himself and Vivian as joint tenants. Gordon and Vivian later built a house on one of these sections (the "Home Quarter"). On June 4, 2004, Gordon and Vivian executed transfers of land adding Melva as a joint tenant to the title to the Home Quarter.
The issue was whether, as Gordon maintained, a resulting trust arose from Gordon and Vivian's transfer of a joint interest in the Home Quarter to Melva such that the beneficial ownership of the Home Quarter remained with Gordon and Vivian, or, as Melva maintained, whether the transfer of a joint interest was an outright gift to Melva.
The evidence indicated that Gordon and Vivian had a close relationship with Melva and her husband Dennis. Of the children, only Melva and Dennis were actively engaged in farming.
On June 4, 2007, Gordon and Vivian executed transfers of land creating a joint interest for Melva with them in the Home Quarter. After the transfer, Gordon continued to reside on the land, farm it, pay property taxes and home-related expenses, and receive oil lease revenues. He never reported a disposition of the Home Quarter on his tax return. Counsel for Gordon suggested that the transfer was simply part of an "estate planning" decision. It was a choice made by Vivian and Gordon to avoid using their wills in relation to the disposition of their land but rather the vehicle of survivorship under a joint tenancy. It was argued that this estate planning decision was not sufficient to discharge the presumption of a resulting trust.
Counsel for Melva submitted that Gordon and Vivian's intentions had to be considered as of the time of the transfer of the joint interest in June 2004 to Melva. At that time, the Supreme Court of Canada's decision in Pecore v. Pecore, 2007 SCC 17, had not yet been decided and, in cases such as this, the law provided that the presumption of advancement applied unless it could be established that beneficial interest remained with the transferor. This was the reason the lawyer retained in relation to the transfer, appeared to have discussed the prospect of a letter of agreement preserving the beneficial title in Gordon and Vivian, as evidenced by his handwritten note. However, if advice regarding retaining beneficial title had ever been given orraised, there was no evidence that Gordon and Vivian ever acted on it.
It being determined that the transfer of title to the Home Quarter section was gratuitous, the Court noted that Melva, as an independent adult child, had the onus of proving that the intention of Gordon and Vivian was to gift a joint interest in the Home Quarter to her. Per Pecore, the close relationship between Gordon and Vivian and Melva and Denis could be considered, but it was just one factor among others.
Another critical aspect of Pecore noted by the Court was Rothstein J's discussion of a situation where the transferor placed assets into a joint account with the transferee with the intention of retaining exclusive control of the account until his or her death, at which time the transferee would take the balance through survivorship. He noted that one of the difficulties in these circumstances is that the beneficial interest of the transferee appears to arise only on the death of the transferor, leading some judges to conclude that the gift of survivorship is testamentary in nature and must fail as a result of not being in proper testamentary form. He went on to find, at para 48, that:
. . . the rights of survivorship, both legal and equitable, vest when the joint account is opened and the gift of those rights is therefore inter vivos in nature. This has also been the conclusion of the weight of judicial opinion in recent times.
Considering all the evidence, the Court concluded that the situation in this case was analogous to that in Pecore. Melva was judged to have rebutted the presumption of a resulting trust. Gordon and Vivian's transfer of a joint interest in the Home Quarter to Melva constituted an irrevocable inter vivos gift and the right of survivorship vested when the gift was made.
It remains to note that, whenever a gratuitous transfer of joint ownership is on the table, the intentions of the transferor(s) should be carefully documented. There is every chance that this will serve to avoid estate litigation.
Originally published by The Estate Planner, Number 240, January 2015
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