OBA lists “broad and far reaching” impacts of Calmusky v. Calmusky decision on estate plans

OBA proposes legislative amendments to address effects of case

OBA lists “broad and far reaching” impacts of Calmusky v. Calmusky decision on estate plans

The judgment in Calmusky v. Calmusky, 2020 ONSC 1506 goes against the way the law is generally understood by lawyers practising in the areas of estate law, pension law and insurance law, the Ontario Bar Association has said.

In Calmusky, the Ontario Superior Court ruled that the designated beneficiary would be presumed to be holding the Registered Income Fund in trust for the estate of the deceased and would have the onus to rebut this presumption.

“I see no principled basis for applying the presumption of resulting trust to the gratuitous transfer of bank accounts into joint names but not applying the same presumption to the RIF beneficiary designation,” wrote Justice Richard Lococo for the court.

In its submission to Ontario’s attorney general and finance minister, the OBA said that the designation of a beneficiary amounted to a designation of both legal and beneficial interests except if there is an expressed intention to the contrary. The OBA added that placing the onus of rebutting the presumption on the designated beneficiary was unfairly burdensome on such beneficiary.

“Provincial legislation, including the Succession Law Reform Act, the Insurance Act, and the Pension Benefits Act, specifically provide for the designation of beneficiary of funds, plans and insurance money, with a primary objective of enabling the transfer of the benefit without a will and without the need to flow through the estate,” wrote the OBA in its submission, which was prepared by its trusts and estates law section in consultation with its insurance law, family law, elder law and pension and benefits law sections.

The OBA listed the impacts of Calmusky, including the uncertainties that may arise where an Ontarian has named a beneficiary with the understanding that such designation would lead to the designated beneficiary outright receiving the proceeds, or where there is a cohabitation or separation agreement or divorce settlement that utilizes a beneficiary designation as a way to secure support payments.

The OBA said that there is a risk of defeating the testamentary intentions of Ontarians who cannot change the designation of their beneficiaries due to an absence of capacity or opportunity, as well as a risk of increased litigation and LAW PRO claims.

The OBA then proposed certain legislative amendments, which may address the possible effects of Calmusky, which may clarify that the presumption of resulting trust would not be applicable to beneficiary designations under the Succession Law Reform Act, the Insurance Act and the Pension Benefits Act and which would be narrow so as to avoid unintended consequences.

The OBA recommended adding the following subsection to s. 51 of the Succession Law Reform Act: “51(3) When a designation is made under a plan, there is no presumption of resulting trust in favour of the participant’s estate of the benefit payable under the plan on the participant’s death.”

The OBA also suggested inserting the following subsection to s. 190 of the Insurance Act: “190(3.1) When a designation is made by contract or declaration under subsection 190(1) there is no presumption of resulting trust in favour of the insured's estate of the insurance money payable under the contract.”

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