While will-makers have flexibility regarding how they dispose of their assets upon death, if they fail to adequately provide for a surviving spouse or child, their will may be varied by the Court. Section 60 of the Wills, Estates and Succession Act of British Columbia authorizes a court to order compensation that it finds adequate, just, and equitable, out of the will-maker’s estate. Only spouses and children of the testator may seek a variation and must commence an action within 180 days from the Grant of Probate. Spouses include common-law partners, with whom the will-maker was in a marriage-like relationship for at least two years. Case law has excluded stepchildren not adopted by the will-maker and birth-children adopted by third parties from being proper applicants of a will variation claim.

The seminal case regarding wills variation is Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807 (“Tataryn”), where the Court held that a will-maker must meet both their legal and moral obligations to surviving children and spouses. The legal obligations are those which would have been imposed if property division and support were considered during the will-maker’s lifetime. Moral obligations represent society’s reasonable expectations of what should be done in the circumstances and are linked to community standards. While the Court in Clucas v. Royal Trust Corporation of Canada, 1999 CanLII 5519 (BC SC) held the will-maker’s autonomy should only be interfered with to the extent statute requires, there are some factors which often lead to variation, even in the situation of adult children who are financially independent.

The standard of living which the will-maker allowed a Plaintiff to become accustomed to will influence their level of moral obligation. In Wilson v. Lougheed, 2010 BCSC 1868, the Court considered the large size of the estate (nearly $20 million), the daughter’s current financial circumstances, and how the will-maker had historically treated her very generously when deciding to vary the will. While there is a general principle that Plaintiffs should continue to be maintained in a manner which they’ve become accustomed to, it is balanced against the estate’s ability to meet competing claims. Adult children who have financially contributed to their parents’ estates, but who are then not adequately provided for in the will are often successful under wills variations claims. This was seen in Wilcox v. Wilcox, 2000 BCCA 491, where the Court varied a mother’s will in favor of the daughter who’d made contributions to the financial purchase and running of the mother’s house. The years which the daughter had cohabitated with her mother, and the mother’s promise that the daughter would inherit the house portion of the estate also had weight in court.

The case law regarding when will-makers can limit or disinherit is ever-evolving and hinges around many factors. Will-makers’ wishes to limit inheritance may come into conflict with the moral obligations set out in Tataryn, specifically when a will-maker’s reasons might not be sufficient under community standards of what a judicious parent would have done. This was seen in Lamperstorfer v. Lamperstorfer Estate, 2018 BCSC 89, where the Court held that the will-maker’s mental health challenges and reclusiveness from society prevented him from meeting his moral obligation to his sons. Absent reasons otherwise, there’s an expectation that adult children will share equally in their parents’ estate, as seen in Laing v. Jarvis Estate, 2011 BCSC 1082. Yet reasons can be various, and the Court is hesitant to interfere with a will-maker’s wishes so long as they were made with a sound mind. In particular, Williams v. Williams Estate, 2018 BCSC 711, where a father arranged his affairs to leave all but approximately $5,000 of his estate to his favorite son, Brent, to the detriment of the other son, Ron. The will-maker had a much stronger relationship with Brent, and Brent also had dependants to support. Further, the will-maker had entirely lost contact with Ron for several years. Despite how the prevailing son Brent was financially stable before his father’s passing, and how the financial outcome was unequal, the Court refused to vary the will.

 

 

 

 

 

 

Due to COVID-19, the Wills, Estates, Succession Act of BC (WESA) was amended in August 2020 to permit a Will-maker to sign a Will in the electronic presence of witnesses and the Will-maker and witnesses to sign by electronic signature.

Section 35.1 of WESA defines “electronic presence” or “electronically present” to mean the circumstances in which two or more persons in different locations communicate simultaneously to an extent that is similar to communication that would occur if all the persons were physically present in the same location. We believe this means that the Will-maker and the witnesses may sign by way of videoconference.

When witnessing a Will by videoconference, each of the Will-maker and the two witnesses must sign an identical Will, and those two (or three, if none of them are in the same place) documents compiled together form the Will. As a result, the Will could be two or three times as long because slipping in signature pages is not permitted. A copy of a Will is considered identical even if there are minor, non-material differences in the format between the copies.

We recommend that a Will signed electronically include a statement that the Will was signed in counterpart in the electronic presence of two witnesses while connected by Audio and Video Conference.

Can the executor of a will receive remuneration for their work? At common law, an executor could only receive payment for their services if authorized under the will. However, this presumption against payment has been superseded by section 88 of British Columbia’s Trustee Act. Accordingly, executors may receive payment from three sources, including:

  1. up to 5% of the gross aggregate value of the estate’s capital;
  2. up to 5% of the income generated by the estate’s assets during the period of administration; and
  3. 4% of the average market value of the assets per annum as a “care and management fee.”

These percentages are the statutory maximums that a court or registrar may grant to an executor.  When determining the executor’s remuneration, the court or registrar will consider the following five factors:

  1. the estate’s size,
  2. the degree of care and responsibility required,
  3. the amount of time required,
  4. the degree of skill and ability demonstrated, and
  5. the level of success achieved in administering the estate.

Section 88 of the Trustee Act applies whenever the will is silent with regards to the executor’s remuneration. It also applies to the administrators of intestacies (persons managing the assets of a deceased person who died without a will).

However, the Trustee Act’s remuneration percentages can be superseded whenever a will includes a renumeration clause for the executor. This provision can be implied. For example, at common law, there is a presumption that any gift to an executor is intended to be compensation for the person’s services as an executor, in lieu of a fee.

 

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 is a complicated process, and it takes a lot of work to ensure that everyone you care about is provided for. Two mechanisms that can be used are Mirror Wills and Mutual Wills.

Mirror Wills create identical provisions in multiple wills and are usually used by spouses. For example, each will could leave everything to the other spouse with a gift over to their children in case the other spouse passes away before the estate is distributed. This method gives the surviving spouse complete control and ownership over the property, and that spouse may change their will after the other’s death if they wish.

A Mutual Will is similar to a Mirror Will in that the provisions in each will mirror the other. It is different because Mutual Wills cannot be changed except as agreed upon. When Mutual Wills are created, both parties agree not to revoke or change their wills, except as provided by that agreement, including after the other’s death. This type of restriction is most often used with blended families, when one or both spouses have children from previous relationships. In those situations, Mutual Wills can be a good way to ensure that if you predecease your spouse that your children will still be provided for.

Problems arise when it is not absolutely clear whether or not two people intended to create Mutual Wills. If there is doubt, Courts generally do not want to interfere with a survivor’s freedom to change or create a new will. This was exactly what happened in Dolby v DeSantis Estate[1989] B.C.J. No. 297 (BC SC). Mr. Dolby and Mrs. DeSantis created identical wills. The wills gave all property to the other spouse, and Mr. Dolby’s children would receive all of the property if they both passed away. After Mr. Dolby’s death, Mrs. DeSantis changed her will and left all of the property to her side of the family. When Mr. Dolby’s children sued Mrs. DeSantis, the Court found that there was no evidence that Mrs. DeSantis ever intended for the first will to be a Mutual Will, and she was free to change her will at any time before her death. The fact that Mr. Dolby and Mrs. DeSantis signed identical wills at the same time did not prove that the wills were Mutual Wills. In order to prove that wills are Mutual Wills, not Mirror Wills, it must be proven that the parties agreed not to revoke the will or to be bound by its provisions in making any subsequent will.

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.