In estate planning, a testator can gift assets under a will, but there are also ways to arrange a testator’s affairs so that assets pass outside of the will and directly to the intended beneficiary. This includes beneficiary designations on investment accounts, and possibly, assets that are jointly held with the testator and another person. Such assets are generally not subject to probate and are paid or (may) pass directly to the beneficiary or intended heir.
In the case of jointly held assets between a deceased and another person, the law presumes that the survivor holds the assets on a ‘resulting trust’ for the estate of the deceased, and it was not intended to be a gift, unless the survivor can prove otherwise. In recent years, however, there has been some uncertainty in the law regarding whether the resulting trust principle also applies to beneficiary designations of registered accounts such as TFSAs and RRIFs. This controversy was recently considered (and hopefully, settled) by the court in Kukna Estate v. Giasson, 2026 ONSC 1842 (CanLII).
In this case, Rose Marie Olar (“Marie”) and Siegfried Ernest Kunka (“Ernie”) were common law partners for 30 years. Ernie was a stepfather to Marie’s children, Ann-Marie Mills (“Ann-Marie”) and Michael Olar (“Michael”).
In October 2021, Marie and Ernie made spousal wills, leaving their assets to each other with a gift over to Ann-Marie and Michael. Marie died in November 2021. Ernie received Marie’s life insurance, TFSA, and RRIF by beneficiary designation.
Ernie was depressed following Marie’s death and sought out new connections through friends, neighbours, support groups, and his church. He also reconnected with an old friend, Angele Giasson (“Angele”), and they began a relationship.
On January 6, 2022, Ernie changed his will to replace Marie to name Ann-Marie and Michael as his sole beneficiaries, and to add a friend, Robert Stach (“Robert”), as an alternate estate trustee and contingent beneficiary. Less than two months later, on March 2, 2022, Ernie changed his will again to gift Robert his car.
On September 21, 2022, Ernie transferred $21,000 to Angele to pay her credit card debt. In January 2023, Ernie listed Angele as his spouse on the TFSA, and in March 2023, he listed her as his spouse on the RRIF. He also changed the designations on both investments from Ann-Marie and Michael to Angele.
On April 23, 2023, Ernie retained a lawyer to change his Will yet again to remove Robert and add Angele as his contingent beneficiary. The Will did not mention the TFSA and the RRIF. Ann-Marie and Michael continued to be named equal beneficiaries.
On August 6, 2023, Ernie passed away.
Ann-Marie brought an application for directions to determine whether the TFSA and the RRIF were subject to a resulting trust in favour of the estate. The court distinguished the 2007 Supreme Court of Canada decision in Pecore v. Pecore (“Pecore”) on its facts and disagreed with a later 2020 Superior Court of Justice decision in Calmusky v. Calmusky (“Calmusky”). Pecore was decided in the context of an inter vivos gift (such as a father adding an adult child as an account holder on a joint bank account), while Calmusky applied Pecore to a beneficiary designation for a RRIF, and found that the presumption of a resulting trust applied to both joint bank accounts and a RRIF, with the result that the RIFF reverted to the estate upon the death of the account holder.
Following the 2021 decision in Mak (Estate) v. Mak, the court agreed that the purpose of a beneficiary designation is to specify what is to happen to an asset upon death, and the presumption of resulting trust does not apply to beneficiary designations under a RRIF. A beneficiary designation is also distinguishable from an inter vivos gift because the transfer does not occur until after the death of the account holder.
The court also referred to various differences between registered accounts with beneficiary designations with TSFAs and joint accounts. Unlike joint accounts, TSFAs/RRIFs (a) are not jointly held; (b) are not transferred during the transferor’s lifetime; (c) are not accessible to the transferee until the transferor’s death; (d) are solely controlled by the transferor until death; (e) are subject to a contract which binds the institution where the funds are held to pay the registered funds to the designated beneficiary upon the transferor’s death; and (f) do not impose a fiduciary duty upon the beneficiary in relation to the transferor. In addition, unlike joint accounts, the transferor may unilaterally change the designated beneficiary at any time before the transferor’s death.
Moreover, the ability to designate beneficiaries is supported by legislation, including Part III of the Succession Law Reform Act, which states at subparagraph 51(1) permits “a person who is entitled to designate another person to receive a benefit payable under a plan on the participant’s death” to make a designation either by signed instrument or by will. Under s.50, a plan includes retirement savings plans, and under s.53, an institution administering the “plan” must pay it out in accordance with the designation under s.51(1).
In addition, the court confirmed that in Ontario, RRSPs do not form part of the estate of a deceased but instead devolve directly to the designated beneficiary. Therefore, no resulting trust applies to the TFSA or the RRIF.
There was also no evidence that Ernie intended for either investment to form part of his estate. Ernie received Marie’s estate on her death. Those monies, therefore, became Ernie’s to do with as he wished upon his death. Marie’s children had no entitlement to that money simply because Marie was the original source. Ernie could have amended the beneficiary designations at any time or changed his Will to designate new beneficiaries, but never did so.
The court also found no evidence that Angele unduly influenced Ernie to change his beneficiary designations. The estate had the burden to establish undue influence on a balance of probabilities, and the threshold is high, to the point of proving that the testator was coerced and their will was overwhelmed. When undue influence is alleged, the court will consider the testator’s circumstances, including the history of their relationships, and will consider factors such as whether the testator (a) is dependent on the beneficiary for emotional and physical needs; (b) is socially isolated; (c) has experienced recent family conflict; (d) has experienced recent bereavement; (e) has made a new will inconsistent with prior wills; (f) has made testamentary changes at the same time as changing other legal documents such as powers of attorney; (g) increased isolation; (h) makes substantial pre-death transfers of wealth to the beneficiary; (i) claims they are running out of money; (j) does not provide any reason or explanation for the testamentary changes; (k) used a new lawyer; (l) permits the beneficiary to be involved in meetings with the lawyer, including conveying instructions; (m) claims they are afraid of the beneficiary.
The only evidence before the court in this case that met the criteria was Ernie paying $21,300 to Angele to help pay her credit card debt. Although she accepted this and other gifts, there was no evidence she asked for any of them, nor was there any evidence, apart from speculation, that she asked to be named as Ernie’s designated beneficiary, or interfered with his estate planning. Indeed, the evidence showed the opposite, as Ernie kept diaries in which he expressed disappointment that Angele was not prepared to move forward with their relationship as quickly as he did, as she declined to move in with him and declined his marriage proposals. While the evidence showed that Ernie was lonely and possibly depressed after Mary’s passing, there was no evidence, apart from speculation, that he was vulnerable, susceptible to undue influence, or cognitively impaired.
The court therefore ordered the RRIF and the TSFA to be paid to Angele or to whom she directed and dismissed the application. Due to the uncertainty in the law regarding whether a resulting trust applied to TFSAs and RRIFs, the court ordered the parties’ costs, including Angele’s, to be paid by the estate.
Takeaway
Although not an appellate decision, this case should provide greater certainty to the estate planners, financial institutions, and any person concerned about their estate planning regarding the distinctions between beneficiary designations and joint assets and the applicability of resulting trust principles, which apply to the latter, but not the former.
For estate litigators, this case indicates that beneficiary designations are testamentary dispositions and must therefore be challenged in the same manner as wills.
