Month: January 2021

What I’m Reading: Interesting Estate Litigation Articles for January 2021

January 29, 2021

The following is a roundup of noteworthy articles published this month on estate litigation and related issues:

  1. Doreen So at Hull & Hull LLP (in Ontario) authored a two part post on a recent Ontario decision where the public guardian and trustee sought to remove an attorney (acting under a power of attorney), and set aside a $250,000 transfer to the attorney along with various other transfers totaling $350,000. The attorney breached her fiduciary duty by accepting the money: Part 1: https://hullandhull.com/2021/01/pgt-vs-cherneyko-part-1-context-and-timing-is-everything/ Part 2: https://hullandhull.com/2021/01/pgt-vs-cherneyko-part-2-breaches-of-fiduciary-duty-in-the-time-of-covid/
  2. WEL Partners (Toronto) continued their series on solicitor negligence in estates and trusts with several posts on the issue this month, including no. 8 – a review of a couple of cases on this issue: https://welpartners.com/blog/2021/01/solicitors-negligence-in-estates-and-trusts-context-no-8-case-review-mccullough-v-riffert-barbulov-v-huston-2010/
  3. Hull & Hull (Ontario) posted two articles about less common potential causes of lack of capacity:  lack of sleep (https://hullandhull.com/2021/01/can-sleeping-too-little-affect-ones-capacity/ by Suzana Popovic-Montag and Tori Joseph), and medication (https://hullandhull.com/2021/01/medication-and-mental-capacity/ by Nick Esterbauer)
  4. Janis Ko at Onyx Law discusses a case that serves as a reminder that an executor must remain neutral in a wills variation claim, https://onyxlaw.ca/bc-executors-fees-not-allowed-for-opposing-wills-variation-claim/
  5. Trevor Todd at Disinherited.com has compiled some pointers (with case references) for removal of a trustee: https://disinherited.com/removing-executors/removal-of-a-trustee-pointers/

Happy Reading!

Case Comment: B.C. Court Dismisses Attempt by Estranged Spouse to Set Aside Property Transfer and Vary Will

January 22, 2021

I am often contacted by executors or beneficiaries of an estate when they have been served with what they consider to be a “nuisance claim”. Unfortunately, the death of a loved one may present an opportunity for others to bring unmeritorious claims. The estate may be large enough to attract claims that should never have been made, and the person who would have the best evidence to oppose the claims (the deceased person) is dead.

A typical example is someone surfacing and claiming to be the deceased’s spouse for the purpose of bringing a wills variation claim or other claim. This person may be a former spouse of the deceased, a casual romantic partner, a roommate, or even a stranger. I have previously written about the test to determine whether someone has standing as a “spouse” to bring a wills variation claim here.

The B.C. Supreme Court recently dismissed a dubious claim by a person claiming to be a current spouse of the deceased (but was found not to be one) in Lee v. Chau 2021 BCSC 70. In Lee, the deceased transferred his real property into joint tenancy with his adult children as joint tenants. His children said that he intended the transfer to be a gift, that their father’s relationship with the plaintiff ended many years before, and their marriage was a sham. The plaintiff argued that she was the deceased’s wife for 19 years. She claimed that the defendants held the property in resulting trust for her benefit, and she also sought to vary the deceased’s will to make provision for her.

The Will included the following rather scathing clause explaining why the deceased made no provision for the plaintiff:

“I am giving nothing to NU LEE [the plaintiff] whom I married on May 30, 1995, as although we were married, she refused to consummate our marriage or live with me as husband and wife and on March 1, 1996, she left me and returned to Taiwan, China and has not returned. I believe that she married me for the sole purpose of facilitating her entry into Canada as a landed immigrant. She has never and refused to consummate our marriage and we have at no time lived together as husband and wife relationship”.

The Court concluded that the deceased understood the effect of transferring property into joint tenancy, and that by doing so he intended to gift his property to his children. The Court gave clear indication that it did not think much of the plaintiff’s attempt to claim an interest in the property. In addition to quoting the above passage from the will, they relied upon the following evidence that the plaintiff was estranged from the deceased:

  • The plaintiff’s extended absence from the property for many years before the deceased’s death;
  • Her full-­time residence outside Canada for more than three years before his death;
  • Her ignorance of his terminal illness;
  • Their lack of contact immediately before his death, and
  • The fact that he died without her knowledge.

The Court also held that the plaintiff was not the “spouse” of the deceased at the date of death, and therefore did not have standing to bring a wills variation claim. The plaintiff was ordered to pay the defendants’ costs. While the Court did not use the words “nuisance claim” or say that the claim was a frivolous or vexatious one, the judge was clearly not impressed by the plaintiff’s attempts to come back and try to make a claim against the property and the deceased’s estate.  This decision confirms that the B.C. Courts are fully prepared to dismiss claims that they consider to be without merit.

What Happens in B.C. when Spouses die Simultaneously?

January 18, 2021

Unfortunately, it is not uncommon for spouses (or other family members) to die in a “common disaster” or tragedy, in which they die at the same time or in circumstances that make it uncertain which of them survived the other. One spouse may also survive the other, but then die mere days later (perhaps from injuries caused by the “common disaster”). If the two spouses have different estate plans, then the question arises: how are each of the estates to be distributed? This may be an issue when dealing with multiple marriages and blended families, where perhaps each spouse has left all or part of their individual estate to the other spouse and their own children, but not to their stepchildren. This arises not just with respect to their wills, but also with respect to jointly registered property, which carries with it a right of survivorship.

Fortunately, the Wills, Estates and Succession Act (“WESA”) simplifies this issue in British Columbia.

WESA provides that if two or more persons die at the same time or in circumstances that make it uncertain which of them survived the other, unless a contrary intention appears in an instrument, rights to property must be determined as if each had survived the other. If two or more persons held property as joint tenants, then unless a contrary intention appears in an instrument, for the purpose of determining rights to property, each person is deemed to have held the property or joint account as tenants in common with the other or with each of the others.

WESA goes one step further: a person who does not survive a deceased person by five days, or a longer period provided in an instrument, is conclusively deemed to have died before the deceased person for all purposes affecting the estate of the deceased person. If two persons hold property as joint tenants, or hold a joint account, and it cannot be established that one of them survived the other by five days, then one half of the property passes as if one person survived the other person by five days, and one half of the property passes as if the other person had survived the first person by five days.  Under the wording of WESA, the five-day survival requirement cannot be shortened in a will, but it can be extended.

As a result, in these circumstances each person’s assets (or their “half” of joint property) forms part of their estate and will be distributed as per their estate plan.

The above provisions do not apply to certain insurance monies, which are dealt with under the Insurance Act. For example, unless a contract or declaration provides otherwise, if the person whose life is insured and a beneficiary die at the same time or in circumstances rendering it uncertain which of them survived the other, the insurance money is payable as if the beneficiary had predeceased the person whose life is insured.

Beneficiaries may Demand Early Distribution of Trust Property

January 7, 2021

The beneficiaries of a trust may be able to compel the trustees to wind up the trust and distribute the assets before the distribution date actually contemplated by the trust.

Many people want to maintain control over their assets and their legacy, even after death. They may have concerns about a child or other beneficiary receiving their bequest immediately or all at once. They may believe the beneficiary is too young to receive their inheritance immediately, or they may have concerns that the beneficiary will spend all of the money inappropriately if they receive it all at once.  There may be concerns about the beneficiary’s lifestyle or mental health.

This control can be maintained through the use of a trust provisions, either as part of a will or as a separate trust. For example, a will may provide that a child’s share of the estate is to be held in trust, with set amounts or percentages of the bequest to be paid out when the child reaches certain ages. A trust may provide that the child’s share cannot be paid out until a given date, but in the meantime the trustee may make distributions in their discretion, or for certain purposes such as education.

The beneficiary may find this frustrating. They may resent that they have to wait until they attain a certain age, or that they have to approach a trustee to request a discretionary distribution from their inheritance. A beneficiary in this position may have a remedy.

If all beneficiaries are of full capacity (i.e. they are independent adults), then they may call for the extinguishment of the trust, notwithstanding the settlor’s expressed wishes. This is referred to as the rule in Saunders v. Vautier.

For example, consider if a settlor established a trust for their child, which provided that the child would not receive the estate until they reached the age of 30. Once the child is an independent adult, they could, under the Rule, demand that the trust be wound up and the assets immediately distributed.

Another example: if a settlor established a trust for their three children, which provided that each child would not receive their share until they reached the age of 30, and if any child did not reach the age of 30 then that child’s share would be divided among the remaining children, then all three children (once they are independent adults), could demand that the trust be wound up and the assets distributed to them.

No court order or approval is technically required when the Rule applies. The beneficiaries may demand that the trustees deliver the trust property, and the trustees must comply. However, in practice most trustees want to ensure that they will not face any liability for winding up the trust early and acting contrary to the express language of the trust, and so they will often seek the direction and approval of the court confirming that they should proceed with the beneficiaries’ request.

The Rule only applies when all of the beneficiaries are adults with capacity. This is often not the case. For example, a trust may be intended to benefit all of the settlor’s grandchildren who have been born by a particular distribution date. If the trust is wound up early, there may be unborn grandchildren who would have benefitted had the trustees waited until the distribution date. Another typical example is a trust to be distributed to a child at some future date, but if the child is not alive on that date then to any children of that child who are alive at that date. There are contingent beneficiaries that may benefit if the trustees wait until the proper distribution date.

In B.C., the Trust and Settlement Variation Act [RSBC 1996] Chapter 463 addresses this situation.   If property is held in trust, the court may approve any arrangement or variation of the trust on behalf of any person having an interest in the trust, whether vested or contingent, who by reason of infancy or other incapacity is incapable of providing consent under the Rule in Saunders v. Vautier. The Act also allows the court to approve an arrangement on behalf of unborn beneficiaries or other persons who may become beneficiaries in the future.

However, the court must not approve an arrangement or variation of the trust on behalf of these classes unless the carrying out of it appears to be for the benefit of that person.

Revisiting one of the examples above: a settlor establishes a trust for their children, which provides that each child will not receive their share until they reached the age of 30, and if any child does not reach the age of 30 then that deceased child’s share would goes to their children (i.e. the settlor’s grandchildren) in equal shares. If the three children want to wind-up the trust before the distribution date (assuming they are all capable adults), they would need the court to approve the wind-up on behalf of their children (born and unborn). The beneficiaries would have to show some reason why the proposed wind-up and distribution would also benefit their children.   This may require creative arguments.

In summary, beneficiaries may not be bound by the timelines for distribution established by the terms of the trust.  They may have remedies to obtain an early distribution.