Sunday, October 25, 2020

Continuing Legal Education: Wills, Estates and Trusts Conference

The British Columbia Legal Education Society is holding its Wills, Estates and Trusts Conference online this year on November 5 and 6. Genevieve Taylor, of Legacy, Tax + Trust Lawyers,  is chair of the Estate Planing Update 2020 on November 5, and Helen Low QC, of Faskin, Martineau, DuMoulin LLP is chair of the Estate Litigation Update 2020 on November 6.

I will be speaking at the Estate Litigation Update on "Bad Fiduciaries." 

For more information, here is the CLE link. 

Sunday, July 19, 2020

Pirani v. Pirani

In a family trust, the trustees may be given the discretion to determine if and when to make payments to beneficiaries. The trustees may be given the power to decide to distribute the trust assets to any one or more of the beneficiaries, to the exclusion of others. Often the discretion is set out in very broad terms, such as “absolute and unfettered discretion.” In most cases, when trustees are given such powers, courts will not interfere with their decisions. However, the powers of trustees are not unlimited. They have a duty of loyalty to the beneficiaries, and in some cases the court may interfere with the trustees’ decisions if not made in good faith or in a conflict of interest. This is illustrated by the recent decision of the Supreme Court of British Columbia in Pirani v. Pirani, 2020 BCSC 974.

During the reign of Ida Amin, four brothers immigrated to Canada. There names were Mohammed Aly Pirani, Madatali Pirani, Pyarali Pirani and Haider Pirani. Only Haider Pirani is still alive. The Pirani brothers established a successful business through family owned companies owning and operating hotels in Canada and in the United States. The two main companies were Pirani Enterprises and Piramco Investments Ltd. In 1993, they arranged an estate freeze of their companies. An estate freeze involves exchanging shares that increase in value with the company for other shares that have a fixed value. New shares are then issued for a nominal amount of money. These new shares are initially worth only the nominal value, but if the company grows, the new shares will become worth more. Often the new shares are either distributed to other family members or held in a family trust, often for the next generations. This is what the four Pirani brothers did.

Each brother had a holding company that held the new growth shares in two family companies. The shares in each holding company were held in four separate family trusts, one set up for the children and grandchildren of each brother.

One of the trusts was created by Mohammed Aly Pirani. In the decision, this trust is referred to as the “MAP Trust.” Mr. Mohammed Pirani was one of the initial trustees of this trust, together with his wife, and his brother Haider Pirani. After Mohammed Pirani’s death, his nephew Mustaq Pirani became a trustee. Mohammed Pirani’s wife also died, but no other trustee was appointed. This trust held shares in a holding company 438702 B.C. Ltd. (“702”) The beneficiaries of the trust were his children Mehboob Pirani (referred to in the decision as Meb), Fareed Pirani, and Arshad Pirani, as well as his grandchildren, Meb’s son Imran Pirani, and Fareed’s daughters Sheliza Pirani and Zaida Pirani. You may notice that the trustees are not beneficiaries.

One of the other trusts is referred to as the Madatali Trust which held shares in another holding company, 438703 (“703”). The trustees were initially Madatali Pirani, Haider Pirani and Meb Pirani. When Madatali died, no new trustee was appointed. The beneficiaries of this trust were Madatali Pirani’s three children, Mustaq Pirani, Bashir Pirani and Najma. You will notice again that the trustees are not beneficiaries. You may also notice that Meb Pirani is a beneficiary of MAP Trust, and a trustee of the Madatali Trust, while Mustaq Pirani is a trustee of the MAP Trust and a beneficiary of the Madatali Trust.

Although the terms of the trusts provided for a termination after 80 years, in each case the trust deed allowed the trustees to terminate the trusts earlier if they considered it advisable to preserve the capital of the trusts because of taxation. Under the Income Tax Act, Canada, the trusts would be subject to a deemed disposition of the trusts assets 21 years after the trust was settled, which would have resulted in significant taxes on the shares of the holding companies. But if the trusts were rolled out of the trusts to the beneficiaries before the 21st anniversary, the tax would be avoided (or really deferred until the beneficiaries sold the shares or died.

The trustees of each of each of the four trusts, including the MAP Trust and the Madatali Trust decided to wind-up the trusts by distributing the shares before the 21st anniversary. 

In winding-up the MAP Trust, the trustees, Haider and Mustaq as the trustees decided to give Meb voting control over the holding company 702, and 45% of the equity, while giving Fareed and Arshad 20% of the equity each, and Meb’s son, Imran, 15% of the equity. There was a twist in the plan. The trustees decided to do another estate freeze, essentially freezing the value of the shares distributed to the beneficiaries, and creating new growth shares, all of which were distributed to Meb.  The effect was that Meb would have voting control over 702 and all of the future growth in value. Before implementing the plan, the trustees removed Fareed and Arshad as directors of 702. Directors’ resolutions would be required to create new shares and implement the estate freeze.

The trustees of the other trusts followed a similar plan in respect of the shares of the holding companies held in each trust. In the case of the Madatali Trust, the trustees gave Mustaq the voting control and growth shares. In each case, growth shares were given to those beneficiaries most active in the businesses.

To implement an estate freeze it is necessary to value the company shares. The value of the new freeze shares issued in exchange for the old growth shares needs to be determined.  An appraisal firm, Duff & Phelps were hired to appraise the shares. However, the valuation was based on the values of various real estate holdings owned by Pirani Enterprises and Piramco Investments Ltd. These valuations of real estate were not based on professional appraisals, but were estimates made by Mustaq Pirani, which Madam Justice Sharma found were unreliable, and likely too low. The effect of a low valuation would be to undervalue the freeze shares, with the effect that the new growth shares would be worth more than a nominal value at the time of the freeze.

Fareed Pirani, Arshad Pirani, Sheliza Pirani and Zaida Pirani, all beneficiaries of the MAP Trust sued Haider Pirani, Mustaq Pirani, who were the trustees, Meb Pirani and Imran Pirani, who were beneficiaries, and the holding company 702. They alleged the following:

a)    The MAP Trustees committed breach of trust and breach of fiduciary duty, and breached the applicable standard of care. The breaches arose from the MAP Trustees’ acting with mala fides, for an improper purpose while in a conflict of interest.
b)    The Defendants are liable for conspiracy, knowing assistance and knowing receipt.
c)     The MAP Trustees colluded with Meb to deliberately injure the plaintiffs. They acted in concert to deprive the plaintiffs of their entitlement to a share of the Family Business in a manner that was deliberate, high-handed and self-interested causing the plaintiffs to suffer loss and damage.
d)    702 and Meb are liable for oppression and breach of fiduciary duty because of their removal of Fareed and Arshad as directors and the creation of the class D shares.

I am going to focus on the allegations that the MAP Trustees committed breaches of their fiduciary duties, or in other words, their duties of loyalty to the beneficiaries, and that Meb knowingly assisted in the breach of fiduciary duties. 

The defendants denied the allegations. The claims were advanced by beneficiaries of the MAP Trust, and the defendants focused their defence on the terms of the trust, which as noted gave the trustees the discretion to wind-up the trust, and gave them a broad discretion on how to distribute the shares. The trustees of the MAP Trust, Haider and Mustaq were not beneficiaries of that trust, and they argued that they had no conflict of interest.

However, Madam Justice Sharma took a broader approach, and considered the overlapping roles of the trustees and directors of the holding companies. The trustees of the four trusts addressed the winding-up of the trusts before the 21- year deemed disposition in concert. They went further than distributing the shares by implementing new estate-freezes and determined the direction of the family business, without properly considering the interests of the other beneficiaries.

She wrote at paragraphs 281, 284 and 285:
[281]     It is important to analyze their conduct in context. It is materially significant that despite the existence of separate trusts and Numbered Companies, the Defendants created and implemented a plan that dealt with four trusts together. They chose to act collectively to address the 21 Year Rule.
[282]     The trustees decided to implement an estate freeze for the purpose of differentiating the type of shares they wanted to bestow amongst the beneficiaries of each trust. Although I make no finding on this, the quality and independence of a valuation of trust assets may have carried less significance if the trustees knew they would be equally dividing all trust assets. However, that was not the case. I add that Meb and Mustaq acknowledged that obtaining a fair and independent valuation of trust assets was vital to the process of winding up the trusts.
[283]     By no later than May 2013, the trustees of each trust had decided what percentage of the frozen value would be distributed to which beneficiaries. They had also decided upon whom they would confer the control and all future growth of each of the Numbered Companies: for 702 that person was Meb, and for 703 that person was Mustaq.
[284]     In my view, one cannot separate out the Defendants’ decision (as directors in the Family Business) to restructure the Numbered Companies, from their distribution decisions as trustees, which conferred all future growth in each company to only specific pre-determined beneficiaries.
[285]     To the extent the Defendants assert their decisions as trustees was somehow isolated from their decisions about the corporate reorganization, I do not find the evidence supports that conclusion. Specifically, Meb’s insistence that he had “no involvement” in the MAP Trustees’ decision to allocate to him all the future growth in 702 rings hollow on the facts of this case. The Defendants collectively made decisions about the running and future operations of the Family Business.
The Court found that the trustees placed themselves in a conflict of interest and breached their duties of loyalty to the beneficiaries, by failing to act in good faith. They did not consult with other beneficiaries, despite advice from one of their trust lawyers to do so. As set out in the reasons for judgment:

[194]     The Defendants received advice about options to address the 21 Year Rule, but also how to go about choosing one of the options. They were strongly advised to inform and seek the view of all adult beneficiaries before decisions were finalized. Why? Because legally their duty as trustees required them to approach the complex task of winding up of the trust and make decisions only in the best interests of all beneficiaries. I note they were also advised to do this to maintain family harmony (see above, para. 180), but this does not detract from the legal foundation for this advice.
[195]     Given the overlapping roles within the Family Business and family trusts, they needed to do something to address the existing conflicts. They were obliged to ensure their judgment was not swayed by self interest, or indeed anything not consistent with the best interests of all beneficiaries. They did not follow any of the advice they received from Mr. Fish at the outset. It is difficult to conclude how they discharged their fiduciary obligations without following that sound legal advice.
Madam Justice Sharma was critical of the manner in which the shares were valued for the purpose of the new estate freezes. She wrote:

[295]     Thus, Meb and Mustaq had a personal financial interest that favoured an underestimation of trust assets. That conflict was not imposed upon them. Instead, it was created by the Defendants’ joint decision to confer on Meb and Mustaq all future growth in their family’s Numbered Company. The vehicle of that distribution was the distribution of trust funds, but the decision to give themselves all future growth was made at the beginning of the process. Indeed, the decision not to equally share future growth amongst all the beneficiaries was why they had to create new classes of shares in the Numbered Companies before the distribution of trust funds.
[296]     The plaintiffs adduced evidence that seriously questioned the accuracy of Mustaq’s estimates. That evidence strongly suggests that for the SeaTac Property and the properties in North Vancouver, the value he gave to Duff & Phelps was grossly low. The Defendants failed to counter that evidence.
[297]     More troubling, on that very, issue both Meb and Mustaq mislead the Court (see above, paras. 77-88). I conclude, from that lack of evidence and that testimony, that it is more probable than not that both Meb and Mustaq believed the figures supplied by Mustaq were inaccurately low. Given their roles as directors they knew the impact of the corporate restructure. Therefore, they understood how an undervaluation would benefit them as compared to beneficiaries who were to receive only a portion of the trusts’ frozen value. They did nothing about that. That conduct is dishonest, not in good faith and a blatant breach of their fiduciary duties.
She concluded with respect to the breach of fiduciary duties at paragraph 346:
a)    I am satisfied that the plaintiffs established Haider and Mustaq were in a prima facie conflict as the MAP Trustees because of their overlapping roles. They failed to persuade me that they conducted themselves in good faith and with honesty in the face of that conflict. I conclude that Mustaq’s duty of loyalty was impaired by his self-interest. I conclude Haider and Mustaq breached their fiduciary duties to the plaintiffs. 
b)    I am persuaded that the evidence establish that Meb knowingly assisted Mustaq and Haider in their breach of their fiduciary duties. I also conclude his conduct was not in good faith because he was guided by his self-interest.
c)     With regard to the process of winding up of the family trusts and the steps taken to restructure the Numbered Companies, the Defendants acted collectively. I conclude they all were in a prima facie conflict from the outset of the process. Mustaq and Meb failed to persuade me that in light of that, they adhered to their duty of loyalty to all beneficiaries. I conclude their actions and decisions were influenced by their self-interest and their conduct was not in good faith throughout that process.  
She ordered that Meb and Mustaq give up what they gained by breaching their duties, by order the disgorgement of some of the shares that they received, as well as disgorgement of some of the shares Imran received from his father.

Sunday, June 28, 2020

Proposed Legislation Recognizes Electronic Wills in British Columbia

The British Columbia Government has introduced legislation to allow digital wills. There are two main components of Bill 21 – 2020: Wills,Estates and Succession Amendment Act, 2020. First, if passed and brought into effect the legislation will provide that a will-maker may make a will digitally, and the witnesses may also sign digitally. Secondly, the legislation will allow the will to be witnessed remotely, in a manner similar to that provided by the emergency order during the Covid – 19 state of emergency.

The legislation amends section 37 of the Will, Estates and Succession Act, which sets out the formal signing and witnessing requirements for a valid will to recognized wills in electronic form by adding the following subsections:

(3) The requirement under subsection (1) (a) that a will be in writing is satisfied if the will is in electronic form.
(4) An electronic will is a will for all purposes of this Act and any other enactment.
A new section 35.3 recognizes electronic signatures:

35.3 (1) For the purposes of sections 37, 40, 43, 62 and 77,

(a) a reference to a signature includes an electronic signature and a reference to a statement being signed includes the statement being signed electronically, and
(b) a requirement for the signature of a person is satisfied by an electronic signature.
(2) Section 39 (1) [clarification of doubt about signature placement] does not apply to an electronic will.
(3) An electronic will is conclusively deemed to be signed if the electronic signature is in, attached to or associated with the will so that it is apparent the will-maker intended to give effect to the entire will.

Section 54.1 provides that to alter an electronic will, the will-maker must make a new will.

There is also a new section providing for how an electronic will is revoked (you don’t have to smash your computer):

55.1 (1) An electronic will or part of an electronic will is revoked only in one or more of the following circumstances:
(a) by the will-maker, or a person in the presence of the will-maker and by the will-maker's direction, deleting one or more electronic versions of the will or of part of the will with the intention of revoking it;
(b) by the will-maker, or a person in the presence of the will-maker and by the will-maker's direction, burning, tearing or destroying all or part of a paper copy of the will in some manner, in the presence of a witness, with the intention of revoking all or part of the will;
(c) the circumstances described in section 55 (1) (a) and (b) [how to revoke will];
(d) by any other act of the will-maker, or another person in the presence of the will-maker and by the will-maker's direction, if the court determines under section 58 [court order curing deficiencies] that
(i) the consequence of the act of the will-maker or the other person is apparent, and
(ii) the act was done with the intent of the will-maker to revoke the will in whole or in part.
(2) A written declaration made in accordance with section 55 (1) (b) may be in electronic form and signed with an electronic signature.
(3) For certainty, an inadvertent deletion of one or more electronic versions of a will or part of a will is not evidence of an intention to revoke the will.

Section 35.2 is the section that will allow remote witnessing of wills. It says:

35.2 (1) In this Part, except in section 38, a requirement that a person take an action in the presence of another person, or while other persons are present at the same time, is satisfied while the persons are in each other's electronic presence.
(2) For certainty, nothing in this section prevents some of the persons described in subsection (1) from being physically present and others from being electronically present when the action is taken.
(3) If a will-maker and witnesses are in each other's electronic presence when the will-maker makes a will, the will may be made by signing complete and identical copies of the will in counterpart.
(4) Copies of a will in counterpart are deemed to be identical even if there are non-substantive differences in the format of the copies.

Section 35.2 will be retrospective to March 18, 2020.  

Sunday, June 14, 2020

Gifts to Beneficiaries Who Die Before the Will-Maker

What happens to a gift in a will if the beneficiary dies before the will-maker? The beneficiary’s death may happen after the will is made, but the will-maker does not make a new will. On rare occasions, the beneficiary may have died before the will is made without the will-maker knowing of the beneficiary’s death. Often, but not always, the will provides for such a contingency. But what if the will is silent?

Section 46 of the Wills, Estates and Succession Act deals with this issue in British Columbia. This section says:
46   (1)If a gift in a will cannot take effect for any reason, including because a beneficiary dies before the will-maker, the property that is the subject of the gift must, subject to a contrary intention appearing in the will, be distributed according to the following priorities:
(a)to the alternative beneficiary of the gift, if any, named or described by the will-maker, whether the gift fails for a reason specifically contemplated by the will-maker or for any other reason;
(b)if the beneficiary was the brother, sister or a descendant of the will-maker, to their descendants, determined at the date of the will-maker's death, in accordance with section 42 (4) [meaning of particular words in a will];
(c)to the surviving residuary beneficiaries, if any, named in the will, in proportion to their interests.
(2)If a gift cannot take effect because a beneficiary dies before the will-maker, subsection (1) applies whether the beneficiary's death occurs before or after the will is made.
In applying this section, first you look at what the will says. If it says for example that if the beneficiary dies before the will-maker, that gift goes to some other beneficiary, then the provision in the will governs.

If the will is silent, then look at the identity of the beneficiary. If the beneficiary is the will-maker’s sibling, child, grandchild or great grandchild (or in theory further generations), then the gift will go to the deceased beneficiary’s own descendants. The way the legislation works is that it would go to the deceased beneficiary’s children, but if a child also died before the will-maker, then that child’s own children receive a share.

If the beneficiary does not fall within one of the categories in 46(1) (c), or if the beneficiary does not have any descendants, then the gift gets divided among the surviving residual beneficiaries.

The court applied section 46 in Terezakis Estate, 2018 BCSC 805. The will-maker, Aikaterini Terezakis, had five children, two of whom died before her. One of the children who died before her, Sophocles Terezakis, had two children, Victor and Katrina. Victor also died before the will-maker and did not have any children.

The case does not set out the wording of the will, which was rectified by consent. Mr. Justice Basran summarizes the will as rectified as follows:

[6]          If Victor had survived the will-maker, then Sophocles’ share would have been divided equally between Victor and Katrina. The issue before the court was what happens to the portion that Victor would have received if he had survived. One of the beneficiaries argued that his notional portion should be divided among the residual beneficiaries.
Mr. Justice Basran applied section 46 (1) (b) and held that Katrina receives the full amount that her father, Sophocles, would have received, including the portion that would have gone to Victor if he had survived. Mr. Justice Basran wrote:
[14]        The first priority in s. 46(1)(a) contemplates an alternative beneficiary of the gift if one is named or described by the will maker.  The will of Ms. Terezakis does not contemplate an alternative beneficiary.  It would have been highly unlikely that an alternative beneficiary would have been named in the circumstances where a mother, Ms. Terezakis, outlives not only her son, Sophocles, but also one of her grandchildren, in this case Victor.  The will understandably does not describe Katrina or any other person as an alternative beneficiary in these unusual and most unfortunate circumstances.
[15]        The next priority is set out in s. 46(1)(b) and is instructive.  Applying it to these facts, Sophocles is a descendant of Ms. Terezakis and at the time of Ms. Terezakis's death on September 3, 2016, the only descendant of Sophocles Terezakis was his daughter, Katrina.  Accordingly, by the operation of s. 46(1)(b), the share of Ms. Terezakis's estate that would have gone to Sophocles goes to Katrina. 
[16]        Having found that s. 46(1)(b) applies, it is unnecessary to consider s. 46(1)(c). 

Thursday, May 21, 2020

British Columbia Now Allows Electronic Witnessing of Wills During Covid-19 Emergency

On May 19, 2020, Mike Farnworth, the Minister of Public Safety and Solicitor General,  signed Ministerial Order No. M161 which allows wills to be witnessed electronically during the current state of emergency. If the process set out in the Order is complied with, a will made during the state of emergency will comply with the formal requirements for a valid will. 

It is important for readers of this post to keep in mind that this only applies during the Covid 19 state of emergency, and not to wills made after the state of emergency ceases.

Two witnesses are still required, and if the will is electronically witnessed, at least on of the witnesses must be a B.C. lawyer or B.C. notary.

The requirements are set out in  section 3 of the Order as follows:

3 (1) If a will is made in accordance with this order, the requirements in section 37 (1) (b) and (c) of the Wills, Estates and Succession Act in relation to a will-maker and the witnesses signing and witnessing the will in the presence of each other are satisfied. 
(2) When making a will, the will may be signed and witnessed while the will-maker and the witnesses to the will are in each other’s electronic presence. 
(3) For certainty, nothing in this section prevents some of the individuals described in subsection (2) from being physically present and others from being electronically present when signing and witnessing a will. 
(4) At least one of the witnesses to a will must be a lawyer or a notary public. 
(5) A will may be made by signing complete and identical copies of the will in counterpart. 
(6) Copies of a will are identical even if there are non-substantive differences in the format between the copies. 
(7) A will made in accordance with this order must include a statement that it was signed and witnessed in accordance with this order.

Saturday, May 09, 2020

Making a Will in British Columbia if in Isolation During the Covid-19 Pandemic

[Since I wrote this post, the British Columbia government has made an Order permitting electronic witnessing of wills during the Covid-19 emergency, rather than the process I have set out below. See my more recent post. However, the discussion below may still be relevant after the Covid-19  state of emergency ceases in certain (although rare) circumstances.]

Although I much prefer to meet in person with clients to discuss their estate plans, I am getting used to video conferencing or taking instructions by telephone during this covid-19 pandemic. It seems to work well enough most of the time, but what about signing wills?

British Columbia has certain formal requirements for making a valid will. These are set out in section 37 (1) of the Wills, Estates and Succession Act:

37  (1)To be valid, a will 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.
 As at the date of this post, in contrast to some other places, British Columbia has not made any law providing for virtual witnessing of wills, by audio-visual communication, such as skype or zoom. It is necessary to for the two both witnesses to be in the same room when the will-maker either signs or acknowledges her signature. Alternatively, all three could be outdoors within sight of each other.

There is no requirement that the lawyer who drew the will be one of the witnesses. Accordingly, if the lawyer cannot practically attend to witness the will, either because of distance, or because of social distancing during the covid-19 pandemic, the lawyer may provide instructions on how to sign the will, and two others may witness the will. It is important, however, that neither a beneficiary or the spouse of a beneficiary witness the will, because that may invalidate the gift in the will to the beneficiary.

There may be situations where someone is in isolation and cannot get two people to witness the will. What should she do?

I suggest the following:

First, the lawyer should go through the will by audio-visual technology or by phone. The lawyer should confirm that the will reflects the will-maker’s intentions, and make good notes. The lawyer should also make a statutory declaration setting out the circumstances and the fact that the will-maker stated that the document reflects her intentions.

Second, the document itself should contain language indicating that the will-maker intends the document to be effective. I suggest something along the lines of “I am signing this document without any witnesses because I am in isolation during the covid-19 pandemic. This document reflects my deliberate, fixed and final intentions in respect of my appointment of executors and the disposition of my assets. I ask the court to give effect to this document pursuant to section 58 of the Wills, Estates and Succession Act.”

Third, the will-maker should sign and date the will at the end, and initial the bottom of each of the other pages.

Fourth, the will-maker should keep the document in a prominent place where it can be easily found, and advise the lawyer and her executors where she is keeping it.

Fifth, as soon as practical, the will-maker should sign another will in the presence of two witnesses in compliance with section 37 (1) of the Wills, Estates and Succession Act.

But if the will-maker passes away before she is able to complete a will in the presence of two witnesses, her named executor, or another person, may apply under section 58 of the Wills, Estates and Succession Act to the Supreme Court of British Columbia to give effect to the document as the last will despite the fact that it does not comply with section 37(1). Although the applicant seeking approval of the document would have good evidence in support of the application, this is a much more costly process than probating a will that complies with section 37 (1). Accordingly, this approach should be used as a stop-gap and the will-maker should sign a will in the presence of the two witnesses as soon as she is able.

Saturday, April 25, 2020

Right of Spouse to Acquire Spousal Home in Intestate Estate

In British Columbia, when a person dies without a will (or in other words intestate), his or her spouse may take the deceased interest in the spousal home as part of the surviving spouse’s share. The survivor does not receive the house automatically, but the Wills, Estates and Succession Act provides a mechanism for the spouse to select the home.

When someone dies without a will leaving a spouse and children or other descendants, the spouse receives the first $300,000 if the descendants are descendants of both the deceased and the spouse, or $150,000 if the deceased left descendants who are not also descendants of the spouse. For example, if the deceased had a child from a previous relationship, the surviving spouse would receive the first $150,000 as her preferential share. The spouse is also entitled in either case, to one-half of the rest of the estate.

Sections 26 through 35 of the Wills, Estates and Succession Act sets out the process for a surviving spouse to receive the spousal home. When the personal representative applies to court for a representation grant, the representative must give notice to the spouse of her right to acquire the spousal home. She has 180 days from the date the court issues the representation grant to provide written notice to the personal representative of her decision to acquire the home. If the spouse is the personal representative, then she must give notice to those entitled to a share of the estate, and if any are minors or mentally incapable person, notice is also given to the Public Guardian and Trustee.

When the spouse gives notice, the notice must set out a value of the home. If the personal representative agrees with the value, then the agreed value is taken from the spouse’s share of the estate. If the spouse is the personal representative, then the other beneficiaries may agree on the value. If there is a disagreement about how much the home is worth, then the court may determine the value.

What if the value of the home exceeds the spouse’s share? For example, what if the home is worth $1,000,000 but the value of the estate after payment of debts and expenses is $1,200,000, and the spouse’s share is $750,000? The spouse may then purchase the home by paying the difference into the estate ($250,000 in our example).

If purchasing the home would “impose a significant financial hardship to the spouse,” then the court has a broad discretion to give the spouse the home and may impose conditions. For example, the court could require the spouse to pay the other beneficiaries and amount that is less than the difference between the value and the spouse’s interest in the estate. The court may also place a charge on the home in favour of the other beneficiaries, in which case they will eventually receive funds, but may have to wait until sometime in the future as the court may set out, perhaps when the spouse sells the home, ceases to live in the home or dies. In applying this provision, the court will need to balance the interests of the spouse and the other beneficiaries.

I am not aware of any reported court decisions that have applied these provisions. Fortunately, my experience has been that the value of the spouse’s share of the estate has been sufficient to acquire the house, and the value has been agreed upon.

These provisions also apply when there is a will does not dispose of all of the deceased’s assets (referred to as a partial intestacy), and does not dispose of the home. Partial intestacies are unusual in professionally drawn wills, but may occur, if for example, the will-maker makes a will leaving specific assets to beneficiaries, but does not have a clause disposing of the residue of the estate.