The presumption of resulting trust and beneficiary designations: What’s intention go to do with it?

When opening an RRSP or RRIF, investors typically designate a beneficiary. We expect that, when making this choice, most investors intend that their designated beneficiary will indeed benefit from the investment on their death. And further, if there is a dispute between the designated beneficiary and the investor’s estate, we expect investors intend that their choice of beneficiary will prevail. Surprisingly, this is not the case in many provincial appellate courts, which in fact favour the estate in such disputes. More specifically, most Canadian courts apply the presumption of resulting trust to beneficiary designations: they assume, absent other evidence, that the designated beneficiary holds the proceeds of the RRSP or RRIF in trust for the deceased investor’s estate. Only Saskatchewan has taken a contrary position. The Alberta Court of Queen’s Bench in Morrison v Morrison recently weighed both options and endorsed the approach that applies the presumption of resulting trust. In the present article, we analyze the doctrine of resulting trust, its rationale as presented by several leading cases, and empirical evidence evaluating the intentions of Canadian investors. We conclude that applying the presumption of resulting trust to beneficiary designations betrays both the theory and purpose of the presumption. It also runs counter to the intentions of most Canadians and creates uncertainties in millions of beneficiary designations. Finally, we present several solutions for bringing the law in line with the intentions of investors, and indeed common sense.