Sunday, June 28, 2015

What Does Section 155 of the Wills, Estates and Succession Act Really Mean?

Does section 155 (1)(a) of the Wills, Estates and Succession Act permit an executor or administrator to distribute an estate within 210 days of a grant of probate or letters of administration with will annexed without the consent of a disinherited spouse or child, if all of the beneficiaries named in the will consent?

I have now discussed the meaning of section 155 (1) (a) with several other estate lawyers, and I think the wording of this section is quite ambiguous.

It may be useful to set out the section in its entirety to see the context.

Distribution of estate

155 (1) The personal representative of a deceased person must not distribute the estate of the deceased person in the 210 days following the date of the issue of a representation grant except
(a) with the consent of all beneficiaries and intestate successors entitled to the estate, or
(b) by order of the court.
(2) The personal representative of a deceased person must not distribute the estate of the deceased person after the period referred to in subsection (1) without consent of the court if
(a) a proceeding has been commenced to determine whether a person is or is not a beneficiary or intestate successor in respect of the deceased person's estate,
(b) relief is sought under Division 6 [Variation of Wills] of Part 4 [Wills], or
(c) other proceedings have been commenced which may affect the distribution of the estate.
(3) Nothing in this section
(a) affects any right or remedy against a person to whom an estate has been distributed in whole or in part, or
(b) extends any applicable limitation period.

There are two ways to interpret subparagraph (1) (a). One is that the personal representative (executor or administrator) may make a distribution within the 210 day period if all of the beneficiaries consent provided that the will disposes of the entire estate. This is because (or so those holding this interpretation will argue) if the will disposes of the entire estate there are no “intestate successors entitled to the estate.” There are only intestate successors entitled to the estate if there is no will, or if the will does not dispose of all of the estate. This interpretation seems to correspond with the literal meaning of the words, and my sense is that this may be the most popular interpretation (although my handful of conversation is not exactly a scientific survey of lawyers).

I think the above interpretation is wrong, and it is risky for a personal representative to distribute within the 210 days without the consent of all of those who would be entitled to the estate if there were an intestacy, even though there is a will that disposes of the entire estate.  If I am correct—and we won’t know until there is a court decision on point -- then their consent is required in addition to the consent of the beneficiaries.

My interpretation is based on the underlying purpose of section 155 which is to preserve the estate to allow those who wish to make certain claims, most notably claims to vary the will under Part 4, Division 6 of the Wills, Estates and Succession Act, time to do so. If anyone does make a claim to vary the will, the freeze on distribution is extended until the claim is resolved.

This section replaces section 12 of the now repealed Wills Variation Act, and its function is similar. Section 12 of the Wills Variation Act read:

No distribution until 6 months after probate

12  (1) Until 6 months have passed from the issue of probate of the will in British Columbia or the resealing in British Columbia of probate of the will, the executor or trustee must not distribute any portion of the estate to beneficiaries under the will except
(a) with the consent of all persons who would be entitled to apply, or
(b) if authorized by order of the court.
(2) Until the period referred to in subsection (1) has passed, a title passing by devise to a beneficiary must not be registered in a land title office unless under a similar consent or order, except subject to the liability of being charged by an order made under this Act.

The persons entitled to apply under the Wills Estates and Succession Act are the deceased’s spouse (including a common-law spouse), and the deceased’s children. Those are also the persons who would be entitled to a share of the estate if there is an intestacy.

The significance of the 210 day period is that it is the same time period a person claiming the vary a will has to both file a notice of civil claim in court (180 days) and serve it on the personal representative (a further 30 days).

If section 155 is interpreted to mean that only the consent of the beneficiaries are required if the will disposes of the entire estate, then the protection is significantly emasculated. If the will-maker leaves his entire estate to his nieces and nephews, and nothing to his spouse, then it is the spouse who will not want the estate is not distributed before she files her claim to vary the will. The nieces and nephews may be quite content to consent to an early distribution to them. It is no answer to say that the spouse can later pursue the beneficiaries for her share if she is successful in a claim to vary the will. She may, but it could be quite costly if there are many of them, or some live outside of British Columbia, and she may be without any practical recourse if they spend what they receive and have no other significant assets. Why have the provision at all if not to ensure that the estate is available if someone such as a disinherited spouse successfully applies to vary the will.

Furthermore, subsection 155(1) should be read in conjunction with subsection (2), which says that if proceedings are brought that may affect the distribution, including wills variation claims, then the prohibition on distribution is extended, and the personal representative requires the court’s consent to make a distribution. It would be inconsistent to allow the personal representative to distribute within 210 days without the consent of a disinherited spouse or child, or a court order, but then require a court order after that time period if the spouse or child does file a wills variation claim.

The other problem with the interpretation that the personal representative does not have to get consent for an early distribution of those intestate heirs who are not named in the will, is that the personal representative does not really know who is ultimately “entitled  to the estate” until after the time for bringing a claim has passed. If in our example of the disinherited spouse, the spouse does apply to court to vary the will, and is ultimately successful, she will be entitled to a share of the estate by virtue of the court order varying the will. But that will not be determined until well after the personal representative has distributed the estate if he or she has done so within the 210 days after probate.

Section 155 is broader than section 12 of the Wills Variation Act, and is intended to freeze the estate until other potential issues are resolved. For example, a person may seek a court interpretation of a will to determine if he or she is a beneficiary. Or there may be a disagreement about whether a person is a “spouse” as defined by the Wills, Estates and Succession Act. 

Saturday, June 20, 2015

Leah Schurian Joins Sabey Rule LLP

I am pleased to write that Leah Schurian has joined our firm.

While I write frequently about estate disputes, Leah is focused on avoiding disputes through good planning, including estate and business planning. Good planning also reduces the risk of lawsuits in case of a breakdown of a marriage or marriage-like relationship. With that in mind, she drafts and advises on marriage and cohabitation agreements.

Leah also practices real estate law.

Sunday, June 07, 2015

Limitation Period for Contesting the Validity of a Will

What is the limitation period for bringing a claim in British Columbia for contesting the validity of a will under the new Limitation Act?

Perhaps the Limitation Act, SBC 2012, c. 13, is not that new anymore, having come into effect over two years ago on June 1, 2013. But under the transition rules, the previous legislation continues to apply to many claims, and for convenience I will refer to the current Act as the new Limitation Act. In a previous post, I wrote about how the new Limitation Act works.

As far as I know, there have been no reported decisions applying the new Limitation Act to claims contesting the validity of wills in British Columbia. But if an Ontario case, Leibel v. Leibel, 2014 ONSC 4516 (Canlii), is applied in British Columbia, the limitation period may in some cases be as early as two years following the date of death.

Eleanor Leibel died on June 4, 2011. She made two wills on April 9, 2011, one of which is referred to as a primary will, and which her estate trustees probated, and the other, referred to as her secondary will, disposed of assets for which probate was not required in Ontario. She made her wills while terminally ill with brain cancer. She appointed her sister and her separated husband as her estate trustees, and left her estate to her children, Blake Leibel and Cody Leibel. Under her wills, Blake Leibel received a larger share of her assets.

Blake Leibel wrote to the lawyer who drafted the wills a couple of weeks after his mother’s death, expressing concern about the appointment of the trustees, and asking for referrals for independent advice. One of the estate trustees sent copies of the Wills to Blake Leibel who lived in California by Purolator on July 12, 2011.

The Estate Trustees made distributions to Blake Leibel, and, he lent money to a corporation to pay estate income tax liabilities.

On September 5, 2013, Blake Leibel brought an application for a declaration that the 2011 wills were invalid, on the stated grounds that his mother did not have capacity to make the wills, and that she was unduly influenced in making them. Under one of her previous wills, he would have received her entire estate to the exclusion of his brother.

The estate trustees applied to dismiss the application in part on the basis that the limitation period had expired. In reaching her decision that the limitation period for bringing the claim had expired, Madam Justice Greer set out the applicable provisions of Ontario’s legislation as follows:

[35]           In my view, the provisions of the Act apply with respect to Blake’s Application being outside the limit under the Act.  Section 4 of that Act states:
Unless the Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. 
 and Section 5(1) states:
A claim is discovered on the earlier of,
(a)   the day on which the person with the claim first knew,
(i)     that the injury, loss or damage had occurred,
(ii)   that the injury, loss or damage was caused by or contributed to by an act or omission,
(iii) that the act or omission was that of the person against whom the claim is made, and
(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and
(b)   the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).
Subparagraph 5(2) of the Act, says that a person with a claim shall be presumed to have known of the matters referred to in clause (1)(a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

Madam Justice Greer found that by July 31, 2011,Blake Leibel had sufficient information to commence a claim. She wrote,

[39]           In applying the “discoverability principle,” Blake had the knowledge to commence a will challenge on or before July 31, 2011.  By that date he knew the following facts:
(a)   Prior to Eleanor’s death Blake knew that Eleanor had recovered from lung cancer but now had brain cancer. 
(b)   He knew Eleanor had changed her previous Wills.
(c)   He knew the date of Eleanor’s death, as Lorne had called him and Cody on that date.
(d)   He received copies of the Wills prior to July 31, 2011, and he knew who the Estate Trustees were under the Wills.
(e)   He knew what Eleanor’s assets were. He had at least a sense of her income, as she had been sending him monthly cheques before the date of her death and had a sense of the value of her assets. 
(f)   He signed corporate documents for a company now owned by her Estate prior to July 31, 2011.
(g)   He had communicated with Ms. Rintoul about his concerns and she gave him the names of three estates counsel to consider, as independent legal advisors. 
Blake, therefore, had all of the information needed to begin a will challenge.  He chose, instead, to take many of his benefits under the Wills before he commenced his Application.  

Madam Justice Greer held that the two year limitation began to run from the date of death, on June 4, 2011. In this respect, the judgment may be open to the criticism that Madam Justice Greer did not apply the discovery principle (although perhaps the presumption in subsection 5(2) applied), but in view of her finding that Blake Leibel had sufficient knowledge by July 31, 2011, and he commenced his application more than two years after that date, he would have been out of time in any event. 

Because the decision is an Ontario decision, it is not binding on British Columbia courts, but may be persuasive in view of the similarities between the provisions of the Ontario legislation and British Columbia’s new Limitation Act. Section 6(1) of B.C.'s Act provides for the basic limitation period as follows:

Basic limitation period

(1) Subject to this Act, a court proceeding in respect of a claim must not be commenced more than 2 years after the day on which the claim is discovered.

The discovery rule in British Columbia is set out in section 8:

General discovery rules

8  Except for those special situations referred to in sections 9 to 11, a claim is discovered by a person on the first day on which the person knew or reasonably ought to have known all of the following:
(a) that injury, loss or damage had occurred;
(b) that the injury, loss or damage was caused by or contributed to by an act or omission;
(c) that the act or omission was that of the person against whom the claim is or may be made;
(d) that, having regard to the nature of the injury, loss or damage, a court proceeding would be an appropriate means to seek to remedy the injury, loss or damage.

Although the limitation period may in some cases begin to run from a date later than the date of death by virtue of the discovery rule, the safe course for anyone wishing to challenge the validity of a will is to file an application in court before the second anniversary of the date of the will-maker’s death.

It should be noted that there are different limitations for different types of estate litigation. For example, wills variation claims under the Wills, Estates and Succession Act must be brought within 180 days from the date of probate. The limitation period is shorter, but does not begin to run until probate.

Sunday, May 24, 2015

Fargey v. Fargey

If you want to ensure that your child or grandchild (or any other beneficiary) will not have control over an inheritance from you until he or she attains a more mature age than nineteen, the age of majority in British Columbia, then it is important that your will be drafted to avoid that beneficiary from being able to terminate the trust your create in your will for him or her. One way you may accomplish this is by providing that if the beneficiary dies before the age at which you wish to give the beneficiary control, his or her children will receive the funds held in the trust. But simply saying that a trustee will hold a beneficiary’s share until the beneficiary attains the age of say twenty-five will not do.

I have written before about the rule in Saunders v. Vautier (1841), 41 E.R. 482, allowing a beneficiary with legal capacity to terminate a trust if the beneficiary’s interest has fully vested, but the principle has been applied recently in British Columbia. The case is Fargey v. Fargey, 2015 BCSC 721.

Donald Robert Fargey in his will provided that if, as occurred, his wife and either of his two children died before him, the share of the deceased child, the trustee of his estate would hold the that share for each of that deceased child’s own children (Donald Fargey’s grandchildren) and:

invest and keep invested each such sub-share and to pay the income therefrom or so much thereof as may be necessary or advisable in my Trustee’s discretion for the grandchild’s maintenance, education or benefit during his or her minority, (any income not so paid in any year to be added to the capital of the share) and upon my grandchild attaining the age of twenty-five (25) years to distribute the capital of the sub-share to him or her.

The will did not contain a provision for anyone else if a grandchild died before the age of 25.

Donald Fargey’s son died before him, and his son had two children, Mathew Robert Fargey and Joseph Bartholomew Fargey. Mathew Fargey is an adult, but not yet 25, and Joseph Fargey is still a minor. Both grandchildren applied to court to terminate the trust, with Joseph Fargey’s mother bringing the application as his litigation guardian.

The two grandchildren relied on Saunders v. Vautier. In his reasons for judgment, Mr. Justice McEwan wrote at paragraph 7:

[7]             The authority cited by the petitioner is Saunders v. Vautier (1841), 41 E.R. 482 (Saunders). It was considered in British Columbia in Grieg v. National Trust Co. Ltd. (1997), 47 B.C.L.R. (3d) 42 (B.C.S.C.), where Grist J. observed:
4  Donovan Waters in The Law of Trusts In Canada, 2d Ed. (Toronto: Carswell, 1984) at 962-963, comments on the rule in Saunders v. Vautier (1841), 41 E.R. 482,

If there is only one beneficiary, or if there are several (whether entitled concurrently or successively), and they are all of one mind, and he or they are not under any disability, the specific performance of the trust may be arrested, and the trust modified or extinguished by him or them without reference to the wishes of the settlor or the trustees. (Approved in Re Johnston (1964), 48 D.L.R. (2d) 573 (B.C.S.C.) per Nemetz, J., as he then was).

In finding that Mathew Fargey was entitled to his share outright, Mr. Justice McEwan distinguished a Manitoba Court of Appeal case Fast v. Van Vliet, 49, D.L.R. (2d) 616, in which the court refused an order collapsing the trust where the will provided that a share of the will-maker’s estate would be divided between two named beneficiaries “upon their attaining the age of twenty-five years.” The majority of the Manitoba Court of Appeal held that the interest of each of the beneficiaries had not fully vested, but was contingent on each attaining the age of 25, which is when the division occurs.

In contrast, in Fargey, the division occurred on the date of Donald Fargey, and each of the two grandchildren’s shares vested at that time. The will did not postpone the gift, but rather the enjoyment of the gift.

Mr. Justice McEwan wrote:

[12]         What is clear in that case is that the will [in Fast] provided that the estate was not to be divided into shares for the beneficiaries until they attained the age of 25 years.

[13]         In contrast the shares in Donald Fargey’s will are to be created at the time of his death and the distribution of the share is postponed to the age of 25. It appears that what was anticipated was that equal shares would be created immediately and the income administered as the differing needs of the beneficiaries dictated, until their majority. There is then a gap until each share can be distributed to each brother as each attained the age of 25. The division into shares appears to take place before, not upon the attaining of the age of 25.

Because Joseph Fargey has not attained the age of majority, his share remains held in trust for him until he turns 19. But Mr. Justice McEwan made an order under the Trust and Settlement Variation Act allowing the trustee to use capital from Joseph Fargey’s share for his benefit before he attains the age of 19. This will allow the trustee to use funds to assist with his tuition at his school, which exceeds the income from his share.

Saturday, May 16, 2015

Re Beck Estate

In a previous post, I wrote about the first reported case applying section 58 of the Will, Estates and Succession Act. This section allows the court to give effect to a “record, document, or writing or marking on a will or other document” as a will even though it does not meet the signing and witnessing requirements for a valid will in British Columbia. We now have a second reported decision, Re Beck Estate, 2015 BCSC 676, released on April 29, 2015.

Celena Beck made a will on June 23, 2009. She appointed her son Dietrich Reimer as her executor, gave $25,000 to her granddaughter, and gave her two acre property and the residue of her estate to Deitrich Reimer and her daughterArlene Minshull. The will was made by a lawyer and was properly signed and witnessed.

On November 25, 2012, Ms. Beck made a handwritten record, which she entitled “Codicil to my last will at above date,” and which she signed. She also crossed out the word “codicil” in one place in her will, and wrote “Codicil Enclosed.” There were no witnesses to the handwritten note nor to the markings she added to her will. She gave the handwritten record to her son, the executor.

The contents of the handwritten note are described by Master Young as follows:

The Handwritten Record starts with the words:
Mrs. Celena P. Beck.
Having had my lawyer ‘Mr. Mote’ [sic] make out my will and with myself in my sound mind have been forced to change a few things stated in said will.
[10]         The Handwritten Record goes on to discuss the difficult relationship Arlene has had with the family and her brother, and Arlene’s occupation on her property since 1965. She expresses a wish that Arlene be left alone on the land that she has occupied and worked on over the years; and her wish that Arlene live there for the rest of her life and then leave the land to her only child, Wendy Reimer.

[11]         The Handwritten Record then says:

Rick as my trustee will see that $10,000 goes to my dead Grandsons [sic], son Adam Minshall [sic].
Any money left in Estate should help repair my run-down property.
This will be in Ricks [sic] capable hands.
This is the only Codicil (underlined in red ink) to my legal will.
Celena Pearl Beck.
To be read out by My Lawyer. Mr. Mote [sic] (in red ink)
I thank you (in red ink)

Master Young applied the Manitoba Court of Appeal decision in George v. Daily (1997), 143 D.L.R. (4th) 273 (a case I wrote about here), and Madam Justice Dickson’s decision in Young Estate, 2015 BCSC 182, and considered whether the Handwritten Note represented Ms. Beck’s “deliberate or fixed and final expression” of her wishes. Master Young found that the handwritten note did, but that the only enforceable provision was the gift to Adam Minshull.

Master Young wrote:

 [18]         The Handwritten Record is dated and signed and is written by the deceased. The executor recognizes the handwriting and signature as that of the deceased. Her signature is not witnessed. The wording, “Codicil to my last will” and the words, “To be read out by My Lawyer. Mr. Mote” [sic] suggests to me that this document contains a deliberate or fixed and final expression of intention as to the disposal of her property upon her death. Although the document does not make reference to funeral arrangements, it does make reference to the reading of the Will, which suggests a final expression.

[19]         The fact that the deceased gave this document to her executor for safekeeping one week before her death and told him that she thought the unwitnessed Codicil was a valid Codicil, reinforces my conclusion that this is a final expression of her testamentary intention.

[20]         Some of the content in the Handwritten Record is unenforceable. She speaks of her wish as to how her daughter will use the gift of property when she says:
Arlene must be left alone on the place she has worked all these years and made beautiful as a Park. I would like her to do so the rest of her life. Then leave it for her only child Wendy Reimer …
[21]         In Eberwein Estate (Re), 2012 BCSC 250, the executor sought advice and direction from the court regarding bequests in a Will which were unclear. The bequest that is relevant for this discussion was a gift of $1,000,000 to a beneficiary with direction that she invests the money to purchase a revenue-producing property. Madam Justice Griffin says:
[30]      Courts are greatly suspicious of attempts by testators to give with one hand and retain with the other. If an absolute gift is made, accompanied by uncertain language expressing a wish or request, the courts are reluctant to imply a trust: McIver Estate v. McIver, [1981] B.C.J. No. 68 (S.C.) at para 4; Sutherland Estate v. Nicoll Estate, [1944] S.C.R. 253 at 262, [1944] 3 D.L.R. 551 [sub. nom. Hayman v. Nicoll]. In the McIver case, the word “trust” was used and so the court did not consider the words to be “merely precatory or recommendatory”. However, in the present case, the word “trust” was not used in the clause at issue. Rather, I find that the words used here imposed no defined restrictions on the beneficiaries and are so loose that a trust could not have been intended by Ms. Eberwein, who was sufficiently sophisticated to have spelled out a trust clearly if that is what she intended.
[22]         Ms. Beck made an absolute gift of property to her daughter in the Will. The Handwritten Record contains uncertain language, expressing a wish as to how the property will be used. I do not find that the Handwritten Record creates a trust, but is an expression of wishes or recommendations.

[23]         The only clear gift contained in the Handwritten Record is the gift of $10,000 to “my dead Grandsons [sic], son Adam Minshall” [sic].

[24]         I find that this gift to Adam Minshull is a deliberate expression of the deceased’s wish and testamentary intention, so I will exercise the curative power under the authority of s. 58 of the WESA. I order that that portion of the Handwritten Record is fully effective, as though it had been made as part of the Will.

[25]         I have also considered the words:
Any money left in Estate should help repair my run-down property.This will be in Ricks [sic] capable hands.
 The residue clause in the Will says that the residue of the estate is to be divided between “Dietrick Reimer” [sic] and “Arlene Minshall” [sic]. I do not find that these words in the Handwritten Record constitute a deliberate expression of testamentary intention to vary the residue clause in the Will.

Saturday, April 25, 2015

2015 Federal Budget Contains Changes to Tax Free Savings Accounts and Registered Retirement Income Funds

The 2015 Canadian Federal Government’s Budget released on April 21, 2015 does not appear to contain any changes that will have an impact on trusts or estate-planning (perhaps mercifully given the problems created by the 2014 Budget). There are a couple of changes that will affect retirement savings.

First, the Government has increased the amount that you may put into a Tax Free Savings Account (“TFSA”), from $5,500 per year to $10,000 per year effective January 1, 2015. The Budget has a nice summary of how TFSAs work.

Available since January 1, 2009, the TFSA is a flexible, registered general-purpose  savings vehicle that allows Canadian residents aged 18 or older to earn tax-free investment income, including interest, dividends and capital gains. TFSAs can include a wide range of investment options such as mutual funds, Guaranteed Investment Certificates, publicly traded shares and bonds. Contributions to a TFSA are not tax deductible, but investment income earned in a TFSA and withdrawals from it are tax-free. Unused TFSA contribution room is carried forward and the amount of withdrawals from a TFSA can be re-contributed in future years.

TFSAs differ from Registered Retirement Savings Plans (“RRSPs”) in a few key ways. Unlike RRSPs, there is no tax deduction available when you contribute to a TFSA. But TFSAs can be withdrawn without tax, while you pay tax on RRSPs when you withdraw funds from them. With both TFSAs and RRSPs, funds can grow inside the plan without tax.

Generally, if you are in a low tax bracket, it probably makes more sense (and cents) to contribute the up to the maximum permitted in a TFSA in priority to RRSP contributions, especially if you think you may later end up in a higher tax bracket. TFSAs are also a better vehicle for saving for things other than retirement, such as buying a home.

But if you are in a high tax bracket, RRSPs may be preferable because you get the tax break when you contribute. The benefits of RRSPs are enhanced if you expect to be in a lower tax bracket in retirement.

Another key difference between RRSPs and TFSAs is that with an RRSP when you reach the age of 71, you have to either withdraw the funds from an RRSP, buy and annuity, or convert the RRSP to a Registered Retirement Income Fund (“RRIF”). In contrast, you can retain and continue to contribute to a TFSA until death.

I suspect the most common approach to RRSPs at 71 is to convert an RRSP into a RRIF. With a RIFF you are required to withdraw a minimum percentage each year, the percentage increasing with age. You may take out more than the minimum, but you pay tax on the withdrawals.

This brings me to the second change in the 2015 Budget. The Government has reduced the percentages that you have to take out of a RRIF each year, the effect of which is to allow you to defer tax longer. Here is a description from the 2015 Budget (tables omitted):

The basic purpose of the tax deferral provided on savings in RPPs and RRSPs is to encourage and assist Canadians to accumulate savings over their working careers inorder to meet their retirement income needs. Consistent with this purpose, savings inRPPs and RRSPs must be converted into a retirement income vehicle by age 71. Inparticular, an RRSP must be converted to a RRIF by the end of the year in whichthe RRSP holder reaches 71 years of age, and a minimum amount must be withdrawn from the RRIF annually beginning the year after it is established (alternatively, the RRSP savings may be used to purchase an annuity). This treatment ensures that the tax-deferred RRSP/RRIF savings serve their intended retirement income purpose.

A formula is used to determine the required minimum amount a person mustwithdraw each year from a RRIF. The formula is based on a percentage factormultiplied by the value of the assets in the RRIF. The percentage factors (the RRIFfactors) are based on a particular rate of return and indexing assumption. Currently, a senior is required to withdraw 7.38 per cent of their RRIF in the year they are age71 at the start of the year. The RRIF factor increases each year until age 94 when the percentage that seniors are required to withdraw annually is capped at 20 per cent.

The existing RRIF factors have been in place since 1992. Economic Action Plan2015 proposes to adjust the RRIF minimum withdrawal factors that apply in respectof ages 71 to 94 to better reflect more recent long-term historical real rates of  returnand expected inflation. As a result, the new RRIF factors will be substantially lower than the existing factors. The new RRIF factors will range from 5.28 per cent at age 71 to 18.79 per cent at age 94. The percentage that seniors will be required to withdraw from their RRIF will remain capped at 20 per cent at age 95 and above. Table A5.2 in Annex 5 shows the existing and proposed new RRIF factors.

By permitting more capital preservation, the new factors will help reduce the risk ofoutliving one’s savings, while ensuring that the tax deferral provided on RRSP/RRIF savings continues to serve a retirement income purpose. For example, the new RRIF factors will permit close to 50 per cent more capital to be preserved to age 90, compared to the existing factors (Table 4.1.2).

Sunday, April 12, 2015

Heathfield v. St. Jacques

Although the Wills, Estates and Succession Act has now been in effect for over a year, in most of the court cases being reported now, the Courts are dealing with the law as it stood before the effective date of March 31, 2014. This is because most of the provisions of the Wills, Estates and Succession Act only apply if the date of death occurred after the legislation came into effect. It is interesting to note how the law would have applied in some of the recent cases if the deceased had died on or after March 31, 2014.

The recent decision of Madam Justice Ballance in Heathfield v. St. Jacques, 2015 BCSC 505, provides an illustration.

When Michael Heathfield made his will on August 7, 2004, he was in a common-law relationship with Nicole St. Jacques. They had a child together with another on the way. In his will, he appointed Ms. St. Jacques as his executor. He left his estate to her if she survived him by thirty days, and if not, the will provided that his estate would be held in trusts for his children, until each attained the age of 25.

Mr. Heathfield and Ms. St. Jacques later separated. They divided their property. Their two children resided primarily with her, and he paid child support to her.

Instead of making a new will, Mr. Heathfield wrote in changes on his 2004 will, essentially stating that Ms. St. Jacques would not receive any of his estate, which would go to their two children. These changes were not witnessed by two witnesses as required under the Wills Act. He told others that he wanted his estate to go to his children, rather than to his former common-law spouse.

When Mr. Heathfield died on November 13, 2011, he left an estate valued at approximately $1.2 million.

Ms. St. Jacques as his executor obtained a grant of probate of the will.

The Public Guardian and Trustee of British Columbia brought an application under the Wills Variation Act on behalf of Mr. Heathfield’s two young children to vary the will. The Public Guardian and Trustee argued that the will should be varied so that the estate would be held in trust for each child until that child attains the age of 25, with the Public Guardian and Trustee acting as trustee of the funds.

Ms. St. Jacques opposed the application. She agreed that the estate should be used to benefit the two children, but argued that a formal trust was unnecessary. She as their mother would use the inheritance for their benefit. If the will was varied in favour of the two children, she asked the court to appoint her as trustee of funds.

In opposing the application to vary the will, Ms. St. Jacques relied on a previous Supreme Court of British Columbia decision, Cameron(Public Trustee of) v. Cameron Estate (1991), 41 E.T.R. 30, in which the Court declined to vary a will of a minor child’s mother. In that case, Mrs. Cameron left her estate to her husband, who was the father of the child. The trial judge found that Mr. Cameron was properly maintaining and supporting their child, and refused to vary the will.

Madam Justice Ballance varied Mr. Heathfield’s will by deleting the gift to Ms. St. Jacques, and creating trusts similar to those in the will for each of the two children in respect of the residue of the estate.

In arriving at her decision, Madam Justice Ballance declined to follow the decision in Cameron for two reasons. First, Cameron was decided before the Supreme Court of Canada’s decision in Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807, which provided a framework for determining if a adequate provision has been made, including an analysis of the will-maker’s legal and moral obligations to a spouse and children. Madam Justice Ballance expressed doubt as to whether Cameron is good authority for the proposition that a will should not be varied whenever a minor child’s surviving parent is the sole beneficiary of the will in light of the Tataryn framework.

Secondly, the circumstances in Heathfield are different. In contrast to Cameron, a case in which the court found that the wife and husband relied on each other to provide for their child, following his separation from Ms. St. Jacques, Mr. Heathfield made it clear that he did not rely on Ms. St. Jacques.

Madam Justice Ballance found that Mr. Heathfield had legal obligations to his children, as reflected in the child support he was paying, and moral obligations to them. In leaving a will that made no provision for them, Mr. Heathfield did not meet those legal and moral obligations. In contrast, he did not have those obligations to Ms. St. Jacques, who was not a person who could have applied to vary the will under the Wills Variation Act.

In her reasons for judgment, Madam Justice Ballance noted how the Wills, Estates and Succession Act has changed the law in a couple of respects that would have been significant to this case if Mr. Heathfield had died after it came into effect.

As she wrote at paragraph 82, under section 56, unless there is a contrary intention expressed in the will, “a gift to a person who has ceased to be a married spouse or a common-law spouse is revoked and must be distributed as if the surviving spouse had predeceased the will-maker.”

Section 58 of the Wills, Estates, and Succession Act would have allowed the court to give effect to Mr. Heathfield's handwritten notes on his will despite the fact that they were not witnessed if the court were satisfied that the notes represented his testamentary intentions.

Accordingly, if Mr. Heathfield had died on or after March 31, 2014, the children would likely have received his estate without having to resort to an application to vary the will under wills variation legislation (now Part 4, Division 6, of the Wills, Estates and Succession Act).

Madam Justice Ballance did accede to Ms. St. Jacques request that she be appointed as trustee of the trusts for the children, and she declined the Public Guardian and Trustee’s submission that Ms. St. Jacques should be restricted as trustee in her ability to access income from the trust for the benefit of the children.