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Resulting Trusts May Arise Before Death

Resulting trust before deathLawrence v Lawrence, affirmed by the New Brunswick C.A 1990 , 113 NBR (2d) 129 discusses how the presumption of resulting trust can apply to transfers made out of the bank accounts jointly held by one party while the other party is still alive.

In other words, a resulting trust may arise before the death of one of the joint owners.

As stated in other blogs on this site, and as confirmed by the Supreme Court of Canada in the Pecore decision,   that when property of significant value is transferred to someone else for little or no consideration, the law presumes that the recipient holds the property in trust for the transferor by the recipient.

The presumption of resulting trust can be rebutted by the evidence of the transferor’s intention.

Generally speaking if the intention is clear that a gift was intended, then the presumption of resulting trust will be rebutted and the court will find that a gift was perfected.

The Lawrence case is interesting in that an uncle opened four joint bank accounts with his nephew who was his caregiver.

In addition to helping his uncle pay his bills, the nephew made several substantial withdrawals from the joint accounts for his own benefit.

Of particular significance was that the nephew obtained his uncle’s approval prior to making all but one of those withdrawals.

The trial judge determined that the purpose of the joint account was for the convenience of the nephew doing the banking for his uncle, and therefore the presumption of resulting trust arose.

The court went on however to distinguish that since the uncle knew and approved of the substantial withdrawals, but for the one exception, then as a result the court concluded that it was the uncle’s intention to give those monies to the nephew in consideration for caregiving services.

However the one with drawl that was not approved by the uncle was considered by the court to not to be a gift, and was ordered to be repaid to the estate.

Bank accounts are a particularly common source of estate litigation, and each should be examined as to the purpose of creating the joint account, and in particular who contributed to the funds, as it is clear that not all joint bank accounts are truly jointly owned property ( beneficially owned as opposed to legally owned)

If only one party of the joint ownership contributes the funds, then the law presumes that the co-owner holds his or her interest in the joint account in trust for the financial contributor.

That being the case, then any withdrawals made from the joint bank account for the sole purpose of the non-financial contributor, will likely then be found to be a resulting trust.

The most interesting aspect of the decision from a legal standpoint is that the presumption of resulting trust was applied to transfers made out of a bank account while both parties were still alive, and without discussion of the right of survivorship after one party’s death.

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