The Covid-19 pandemic has generated significant market volatility. Investors must assess risk and consider whether the investment portfolio should be diversified to reduce risk exposure in an unpredictable market. Trustees who have Trust Property invested in the market are faced with additional obligations that can make protecting Trust Property challenging. Trustees must comply with the terms of the Trust Property as well as the legislation governing trusts. In BC, the legislation governing trusts is the Trustee Act (the “Act”).

 

Pursuant to section 15 of the Act, a Trustee may invest property in any form of property or security in which a Prudent Investor might invest. The Trustee is under an obligation when investing Trust Property to exercise the care, skill, diligence and judgment that a Prudent Investor would exercise in making investments. The Trustee is not liable for a loss to the trust arising from the investment of Trust Property if the Trustee reasonably assessed the risk and return and acted as a Prudent Investor.

 

Unlike other provinces, BC does not expressly impose an obligation to diversify investments. However, the Prudent Investor standard implicitly requires the Trustee to assess whether diversification is necessary to reduce risk exposure. The Prudent Investor standard was considered in Miles v Vince, 2014 BCCA 289 [Miles]. The issue on appeal was whether the Trustee was under an obligation to diversify the investment portfolio.

 

In Miles, the Beneficiary claimed the Trustee should have diversified the Insurance Trust’s assets. The Trustee argued she was under no statutory obligation to diversify the investment portfolio. The Court concluded that the Trustee had breached her statutory duty to prudently invest Trust Property pursuant to section 15.2 of the Act. A Prudent Investor must consider the investment portfolio’s risk and whether diversification in necessary to protect the assets. To the contrary, the Trustee had invested the Insurance Trust’s assets into one illiquid asset that put the Trust’s assets at risk. The Trustee had failed to protect the interests of all the beneficiaries of the trust. As a result, she was removed as Trustee. Pursuant to section 31 of the Act, the Court has power to remove and appoint a new Trustee.

 

In another case, Pestano v Wong, 2019 BCCA 141, the Court stated the definition of a Prudent Investor has evolved to mean:

 

  • Making necessary investments that a Prudent Investor would make to protect capital and provide income;
  • Developing risk and return objectives that are reasonable and suitable, given the size of the overall portfolio, and the circumstances of the investor;
  • Ensuring reasonable diversification of the type and class of investments;
  • Acting with prudence when delegating investment authority to an agent;
  • Incurring only reasonable and appropriate costs; and
  • Adopting a balanced approach to management investments

 

Trustees have significant responsibility when investing Trust Property. With the current level of market volatility, it is important to consider whether an investment portfolio should be diversified to reduce the Trust Property’s risk exposure. Heath Law LLP can help you with any questions concerning Trust Property and the Prudent Investor Standard.

 

 

 

This article concerns the recent British Columbia Court of Appeal decision in Bergler v Odenthal, 2020 BCCA 175 [“Bergler] The appeal concerned the validity of a “secret trust” that Ms. Stuhff, now deceased, had allegedly imposed on her common-law partner, Mr. Odenthal. Secret trusts contain two essential features: “communication by the deceased person to his or her devisee, legatee or intestate heir, and an acceptance by that person of the request that he or she will hold the property in trust for the stated person or purposes.”[1] Acceptance may occur in the form of silence. The secret trust must also meet the usual trust requirements of certainty of intention, objects, and subject-matter.

 

The trial judge held that Mr. Odenthal had accepted Ms. Stuhff’s request that her estate would go to her niece, Susanne Bergler. The trial judge determined the acceptance occurred at the hospital shortly before Ms. Stuhff’s death. Ms. Stuhff’s niece and sister testified that in the days leading to Ms. Stuhff’s death, Mr. Odenthal had told them that Ms. Stuhff told him that she wanted her estate to go to her niece, Susanne. Susanne did not have a career or a home and wanted to go back to school. Ms. Stuhff’s sister testified that Ms. Stuhff told her that Mr. Odenthal was to transfer her estate to the Bergler family when he started a relationship with a new partner.

 

A conflict arose concerning when the estate was to be transferred to the Bergler family. Mr. Odenthal claimed he was to hold Ms. Stuhff’s assets until his death (he was 51 years old). After Ms. Stuhff’s death, Mr. Odenthal received the entire estate as heir on intestacy. He later married and removed Susanne as a beneficiary under his will, leaving nothing to the Bergler family. A relative of Ms. Stuhff testified that he overheard Ms. Stuhff tell Mr. Odenthal that when he ‘had a new chick’, she wanted ‘all her money’ to go back to her family.[2] The relative said he did not hear Mr. Odenthal object to the request. The trial judge found the relative’s evidence to be reliable. According to Mr. Odenthal’s testimony, he told Ms. Stuhff that he would abide by her wishes concerning the distribution of her estate. The trial judge held that this constituted the requisite acceptance for the creation of a secret trust.

 

On appeal, Mr. Odenthal claimed there was no evidence of his acceptance of the secret trust. The Court held that the trial judge did not err in finding that Mr. Odenthal had accepted the secret trust. He was required to transfer the assets either upon death or upon entering into a new relationship, whichever came first. A secondary issue on appeal concerned a property owned in joint tenancy by Ms. Stuhff and Mr. Odenthal. Mr. Odenthal claimed it passed to him automatically upon her death and, as a result, never became part of her estate. The Court held that the creation of the secret trust severed the joint tenancy and that once the secret trust came into existence, “nothing was left to pass by the intestacy to the defendant”.[3] The Court upheld the trial judge’s decision and dismissed the appeal.

[1] Bergler at para 2.

[2] Ibid at para 5.

[3] Ibid at para 40.

Wills – No-Contest Clause Validity

A no-contest clause in a Will attempts to limit a beneficiary’s ability to challenge the Will.  An example of such a provision would be:

To X but if X directly or indirectly attempts to contest or oppose the validity of this Will, then X shall forfeit his or her right to the legacy, bequest or gift.

How have the BC courts treated no-contest clauses?

There have been two BC cases that have dealt with no-contest clauses.  In both of the cases, the no-contest clause was deemed invalid.  In one case the no-contest clause was deemed invalid as it breached the in terrorem doctrine by not including a gift-over provision in the no-contest clause and the other was deemed invalid on the basis of public policy as the no-contest clause attempted to circumvent the provisions of legislation formerly known as the Wills Variation Act (“WVA”).

In Bellinger v. Nuytten Estate, 2003 BCSC 563, a no-contest clause was the subject of judicial scrutiny.  The court deemed the no-contest clause void.  The court based its decisions on a breach of the in terrorem doctrine.  This doctrine is creature of equity and stands for the proposition that the will-maker had not really meant to impose the no-contest clause, and that therefore the condition could only be valid if the will-maker demonstrated, by the inclusion of an explicit gift-over clause, that the will-maker intended as the Will suggests.  So in other words, for a no-contest clause to be valid it must include an explicit gift over clause.  A gift over clause using the example above would look like this:

To X but if X directly or indirectly attempts to contest or oppose the validity of this Will, than X shall forfeit his or her right to the legacy, bequest or gift.  If X forfeits his or her right to the legacy, bequest or gift, then the forfeited gift will fall into the residue of my estate.

In Kent v Mckay, [1982] B.C.J. No. 67 the court determined that the no-contest clause was void not because of the lack of a gift over clause but on the basis of public policy.

The court observed that the no-contest clause in Kent purported to forbid “any litigation in connection with any of the provisions of this my Will.” It therefore encompassed even applications under the WVA.

The court in Kent further stated that it is a matter of public policy that support and maintenance be provided for those defined individuals under the WVA and it would be contrary to public policy to allow a testator to circumvent the provisions of the WVA by the creation of such a no-contest clause as was present in Kent. It is important to the public as a whole that widows, widowers and children be at liberty to apply for adequate maintenance and support in the event that sufficient provision for them is not made in the will of their spouse or parent.

Executor’s Remuneration

When you are named as the Executor in another’s Will, there are many duties, obligations and rights associated with that designation.  One of those rights is Executor remuneration.

Executor’s remuneration in BC is guided by s. 88 of Trustee Act.  An executor can receive a maximum of 5% of the gross aggregate value of the estate for his or her care, pains, trouble and time spent in and about the executorship.  The Executor can also receive a fee of .4% of the average market value of the assets on a yearly basis for the care and management of the assets by the Executor.

In addition to the principles found in s.88 the Will itself could designate the amount of remuneration for the Executor.

In either scenario, the amount of remuneration still must be fair and reasonable and bear some reasonable relationship to the work and responsibility of the Executor.  If there is a dispute amongst the beneficiaries and Executor as to how much remuneration an Executor is entitled to, the court will have to intervene and determine the appropriate level of remuneration. The factors that a court will consider when determining Executor remuneration include:

  1. the magnitude of the estate;
  2. the care and responsibility involved;
  3. the time occupied;
  4. the skill and ability displayed; and
  5. the success achieved in the final results.

An Executor can also be reimbursed for expenses he or she may have incurred as a result of fulfilling his or her duties as Executor.  For example, an Executor may have to seek the aid of lawyers or accountants when handling the estate.  The fees that the Executor pays to these various professionals can be recovered as long as they related to the estate and for services that the Executor could not have performed themselves.

 

The purpose of this blog is to make you aware of a recent change in the law with regard to Wills.

The BC Wills Estates and Succession Act (WESA) permits “Multiple Wills” to be used to deal with the assets of a deceased person located in BC.  The purpose behind creating Multiple Wills is to avoid the costs of applying for Probate of the Will.

Probate of a Will is a court process that confirms the validity of a Will and the Executor’s authority to act under it.  If there are assets under the Will that are controlled by third parties such as the Land Title Office (real estate) or a financial institution (bank accounts), these parties are not usually willing to accept the Executor’s authority based solely on the Will.  They require that the validity of the Will and the Executor’s authority also be confirmed by the Court.  The process of securing that confirmation is called “Probate”.

Applying for Probate can be a cumbersome and often costly procedure.  The Executor must list all of the deceased’s assets that are to be dealt with under the Will.  There is also a tax associated with applying for probate of 1.4% of all assets that have been listed ($14,000 per $1,000,000).

Shares of closely-held private companies do not require the consent of third parties.  The title of the shares is not controlled by a third-party, but rather by the company’s Directors.  The BC Business Corporations Act specifically confirms that these Directors can authorize a transfer of the deceased’s shares based on the Will alone, without requiring a Probate of the Will.  Shareholder loans due to the will-maker also do not require Probate.

It is for this reason that it may be advisable to create Multiple Wills.  One Will shall deal with almost all of your assets (the “General Will”) and another Will can be created that deals exclusively with your private company shares and any shareholder loans that are due to you (the “Restricted Will”).  By having the Multiple Wills, only the assets under the General Will would be subject to Probate which will allow you to avoid significant probate taxes on the value of your private company shares and shareholder loans (as these assets are covered off by the Restricted Will).

If you only have one Will that deals with all of your assets then the 1.4% probate tax would apply to all of the assets under the Will.

A Multiple Will estate plan can save a significant amount of probate taxes and can provide some privacy for company related matters.  If you have significant assets in the form of private company shares or shareholder loans and you wish to save Probate taxes you should consider Multiple Wills.  The savings in Probate taxes should significantly exceed the legal costs associated with preparation of the General Will and Restricted Will.

In the recent case of Trudeau v Turpin, 2019 BCSC 150, the Supreme Court of British Columbia considered the concept of undue influence and the application of section 52 of the British Columbia Wills, Estates and Succession Act. “Undue influence” refers to a situation where a will-maker has been improperly influenced such that the Will does not reflect the will-maker’s genuine intention. Section 52 of WESA considers a situation where another person commences an action claiming that a Will results from the undue influence of another person. If the claim suggests that a person:

 

  • was in a position with respect to the deceased person where there was the potential for dependence or domination; and
  • that the person used that position to improperly influence the will-maker.

 

the party alleging undue influence must only prove that the person allegedly exerting undue influence was in a position where the potential for dependence or domination of the will-maker was present. Once this is established, the party seeking to defend the Will must prove that the Will was not created as a result of the undue influence of that person.

 

 

The Facts of the Case

 

In this case, the will-maker was particularly close with one of her four daughters and in her Will left:

 

  • 60% of her estate to that daughter;
  • 30% to another daughter; and
  • 5% each to the last two daughters.

 

The other daughters argued that by virtue of the strength of the relationship between their mother and the favoured daughter and the fact that the mother was dependent on her, the Will was a product of undue influence. The Court considered section 52 of WESA and ultimately found that the other daughters failed to establish that the favoured daughter was in a position where the potential for dependence or domination was present. The Court further stated that, regardless of section 52 of WESA, the evidence did not suggest that the favoured daughter exerted any undue influence.

 

In particular, the Court noted that:

 

  • the favoured daughter never exhibited aggressive or suggestive behaviour;
  • the will-maker had a journal that had confirmed her wishes as early as 1996 (and continued to express a desire to change her Will to reflect these wishes);
  • there was evidence that the will-maker had a dominating personality with her children, including the favoured daughter;
  • the daughter’s demeanor suggested she was not capable of exerting undue influence;
  • when her mother made an earlier Will, the favoured daughter convinced her mother to distribute her estate equally between her children;
  • the will-maker met privately with her lawyer; and
  • the experienced lawyer had no concerns that there was any undue influence present when the will-maker made the Will.

 

Estate Planning – Considerations when Adding a Child as Joint Tenant to your Property

Many parents put their children on title to their residence as a form of estate planning. While this can help avoid probate fees and possibly assist with ease of administration of an estate, the case of Gully v. Gully, 2018 BCSC 1590 [Gully], demonstrates that parents must be careful when adding children onto title to their residence.

In Gully, a mother added her son as a joint tenant on title to her Burnaby property. She did so based on legal advice she received, including that her estate could avoid probate fees. She did not tell her son that he had been added as a joint tenant to title of the property.

In August of 2017, the son, and his company, consented to a judgment of $800,000.00 in favour of Ledcor Construction Limited (“Ledcor”). Ledcor discovered that the son was on title to the property and registered their certificate of judgment on the son’s undivided half interest in the property.

The mother sought a declaration, amongst other things, that the son held the property on a resulting trust for her estate. The court found that the son did not hold the property on a resulting trust for the estate and permitted Ledcor to retain their judgment on title, ultimately stating:

 [24]        Ms. Gully took a risk in registering her son as a joint tenant on her property. Whether she was properly advised of that risk is not before me. However, once she made the decision to register an interest in the Burnaby Property in Mr. Gully’s name, third party creditors of Mr. Gully became entitled to register judgments against Mr. Gully’s interest in the Burnaby property.

If you would like to book an appointment with any of our estate planning lawyers, please contact Heath Law LLP at
250-753-2202 or TOLL FREE: 1-866-753-2202.

Wills and Estate Law – Court Considerations in Wills Variation Cases

In the recent case of Peterson v. Welwood, 2018 BCSC 1379 (“Peterson”), a son sought, amongst other things, to vary his father’s will for failing to make provision which was adequate, just, and equitable in the circumstances.

In making its analysis, the Court stated that the following considerations have been accepted as informing the existence and strength of a testator’s moral duty to independent children:

  • the relationship between the testator and claimant, including abandonment, neglect and estrangement by one or the other;
  • the size of the estate;
  • contributions by the claimant;
  • any reasonably held expectations of the claimant;
  • the standard of living of the testator and claimant;
  • gifts and benefits made by the testator outside the will;
  • the testator’s reasons for disinheriting;
  • financial need and other personal circumstances, including disability, of the claimant;
  • misconduct or poor character of the claimant; and
  • competing claimants and other beneficiaries (para 190).

Relevant to the inquiry in Peterson was the fact that the plaintiff’s father had put the plaintiff on title to the father’s residence as a joint tenant, and the plaintiff became the sole owner of the property after his father died. The Plaintiff also received certain Canada Savings Bonds directly from the Deceased.

In balancing the factors noted above, the Court ultimately refused to vary the Deceased’s Will and found as follows:

[246] The plaintiff undoubtedly believes that his father has treated him unfairly. The Deceased’s disappointment and mistrust in his son, whether justified or not, appears to have precipitated the change in his estate planning. However, even with the change, the plaintiff received approximately 51% of the Deceased’s assets as of the date of death. This disposition was one of a range of possible dispositions of his assets. In all the circumstances, I am unable to conclude that the Deceased chose an option that fell outside the range of options that might be considered appropriate by a contemporary judicious parent. The appellate authorities have repeatedly cautioned that if a will-maker arranges his affairs in a manner that falls within the range of options that might be considered appropriate by a contemporary judicious parent, the will-maker’s testamentary autonomy must be respected.

If you have a question about a wills variation issue, please contact Heath Law LLP at 250-753-2202 and ask to speak to someone in the Wills and Estates Department.

Ever since 2015, when the Supreme Court of Canada decided in Carter v Canada (Attorney General) that a prohibition on physician-assisted suicide was unconstitutional, Canada has had to redefine what end of life care means and what rights individuals have at this time. This is an ongoing process that will likely continue for many years.

The Supreme Court declared that it violated an individual’s rights to life, liberty, and security of the person to be denied medical assistance in dying (“MAiD”) if the person consents, and if they had a grievous and irremediable medical condition that causes enduring and intolerable suffering. In response to Carter, the federal government passed a law that allowed an individual to receive MAiD, but only if they met the conditions in Carter and if their natural death had become reasonably foreseeable.

The new law has been the subject of another constitutional challenge by the BC Civil Liberties Association, which was one of the plaintiffs in the Carter decision in 2015. They argue that the current law is overly restrictive, and that it excludes people with multiple sclerosis, Huntington’s disease, and Parkinson’s disease that should be allowed to have access to MAiD.

The discussion around MAiD continues in the courts, Parliament, legislatures, and in our homes. If you or a loved one is considering MAiD, be sure to research and understand the legal and personal implications of this important decision.

If you need legal advice on medical assistance in dying, end of life planning, or any other law related inquiry, please contact us.

Not every attempt to make a valid Will is successful. The Wills Estates and Succession Act (WESA) of British Columbia has certain requirements that must be established and proven if the Will is to be deemed valid.

There is an age requirement that is designated by s. 36 of the WESA. S. 36 states that a person who is 16 years or older and is mentally capable may make a Will. A Will that is made by someone under 16 is therefore presumptively invalid.

There are other somewhat more technical requirements needed to make a valid Will found in s. 37 of the WESA. For a Will to be valid it must be (a) in writing, (b) signed at its end by the Will-maker or the signature at the end must be acknowledged by the Will-maker as his or hers, in the presence of 2 or more witnesses present at the same time, and (c) signed by 2 or more of the witnesses in the presence of the Will-maker. S. 40 of the WESA provides the age requirements for witnesses to a Will. Signing witnesses to a Will must be 19 years of age or older.

Once the technical requirements for making a Will are met there are also limitations to the type of property that can be gifted in a Will. S. 41 of WESA states that a person may by Will, make a gift of property to which he or she is entitled at law or in equity at the time of his or her death, including property acquired before, on or after the date the Will is made. This effectively means that one is only able to gift property that the Will-maker actually has or is entitled to.

Creating a Will is a significant life event that needs to be attended to with the proper diligence and care. If you would like to create your first Will or have any questions regarding your existing Will please contact Heath Law LLP at 250-753-2202.