Sunday, June 02, 2019

Huber Estate

There are very few reported cases in British Columbia in which a will has been rectified under section 59 of the Wills, Estates and Succession Act. This section has been in effect for five years, which is still relatively new. Section 59 allows the court to correct drafting and other errors in wills. The operation of this provision is illustrated in a recent decision of Madam Justice Francis, Huber Estate, 2019 BCSC 866.

Section 59 allows the court to rectify a will if the judge finds that the will does not reflect the will-maker’s intentions because of

(a)an error arising from an accidental slip or omission,
(b)a misunderstanding of the will-maker's instructions, or
(c)a failure to carry out the will-maker's instructions.
The court may consider direct evidence of the will-maker’s intentions, such as the drafting lawyer’s evidence of what the will-maker told the lawyer what she wanted in her will.

When Mary Louise Huber instructed her lawyer to draft her last will, she told her lawyer that she wanted the residue of her estate divided equally among her three sons. The will as drafted provided that her estate was to be payable to her “children.” The will then had the following clause:

"If any of my children are not then living but such child has left children of his who is or are then living, then the portion that such deceased child would have received if he had been living on the 30th day following the date of my death shall instead be divided in equal shares amongst his children who are then living."

The will was dated November 18, 2015, and Ms. Huber passed away March 23, 2018

Ms. Huber had a daughter who passed away in 1986, and her daughter had children. As drafted the will appears to divide the estate into four shares with one share going to Ms. Huber’s daughter’s children.

The lawyer who drafted the will gave evidence that Ms. Huber told her that she wanted to leave her estate to her three sons, and had not advised her that she had a daughter who had passed away.  in an estate-planning questionnaire Ms. Huber completed, she indicated that she only had three children. She told her lawyer that she the only change she wanted to make from her previous will was to change the executor, because her husband, who was her executor, had passed away. Under the previous will, Ms. Huber’s estate would have been divided among her three sons.

Madam Justice Francis granted the order rectifying the will so that the estate would be divided among the three sons. She wrote:

[8]             It is significant, in my view, that paragraph (j) uses the masculine gender in reference to the children of the Will-Maker.  It is also significant that the Will makes specific gifts to named grandchildren but does not include any gifts to the children of the Will-Maker’s predeceased daughter.
She also based her decision on the lawyer’s evidence. She found that based on the questionnaire, the lawyer reasonably understood Ms. Huber’s sons to be her only children. In this case, the error was rectified on the basis that the lawyer had misunderstood the will-maker’s instructions.

Monday, May 20, 2019

Minor Beneficiaries

Yes, I know the title is ambiguous. I don’t mean beneficiaries who receive a small share of an estate, but rather those who are under the age of majority in British Columbia, which is a person under the age of 19. If a minor is entitled to an inheritance and no trustee has been appointed for her, those funds must be paid to the Public Guardian and Trustee of British Columbia. This happens most frequently when a minor’s parent dies without a will. It may also apply in the case where a minor is left an inheritance by will, but the will does not have a clause appointing a trustee to hold the inheritance for the minor.

Section 153 (1) of the Wills, Estates and Succession Act says:

153 (1)Subject to subsections (2) and (3), if
(a)a minor is a beneficiary or an intestate successor, and
(b)there is no trustee or no trust created for the minor's interest in the estate,
the personal representative, on distribution of the estate, must pay or transfer the minor's interest in the estate to the Public Guardian and Trustee in trust for the minor.
In a recent decision, British Columbia (Public Guardian andTrustee) v. Child 3, 2019 BCCA 171, the Court of Appeal held that it was an error for a Supreme Court of British Columbia judge to order an administrator of the estate of a person who died without a will to order interim distributions directly to a minor’s parent to reimburse her for the child’s expenses and for funds she borrowed to pay expenses. Madam Justice Fisher wrote:

[8]             The language of s. 153(1) is unambiguous. It requires the administrators to pay any distribution of Mr. Yuan’s estate to the PGT on behalf of the minor beneficiaries, as there is no trustee in place.
[9]             There is good reason for this requirement. The PGT is the only trustee for these minor beneficiaries. As the PGT submitted before the chambers judge, it would not be truly acting as trustee if the distribution went directly to Mother 3. For example, in respect of past expenses, the PGT submitted that Mother 3 would be entitled to reimbursement for funds she used to pay Child 3’s expenses but not for funds she borrowed from others; in that case, the PGT would ensure that funds legitimately borrowed for Child 3’s expenses would be repaid to the lenders directly. Given the state of the materials in the record, it is difficult to understand the judge’s outright rejection of the PGT’s submissions.
[10]         It is also difficult to understand the judge’s failure to put his mind to s. 153 of WESA. Ordering specific funds to be paid to Mother 3 for specified purposes is insufficient, in my view, as it is the trustee’s duty to act in the best interests of Child 3 to ensure that the distributions are appropriate for his needs. I agree with the PGT’s submission that the judge’s order created a situation in which the interim distribution of Child 3’s interest was made without an assurance that the funds would be used in a manner consistent with the overall value of his interest in the estate (which is currently uncertain) or his projected needs.
Professionally drafted wills usually contain an “infant’s clause,” which provides that the executor or hold funds in trust for any minor beneficiaries. Alternatively, a will-make may appoint other trustees for minor beneficiaries in the will. Section 153(1) does not apply if a trustee is appointed in the will.

The court may also appoint a trustee for a minor beneficiary. Section 153 (3) provides:

(3) Subsection (1) does not apply if, before distribution of the assets of the estate, the court, on application and with notice to the Public Guardian and Trustee, appoints a trustee to hold and administer the minor's interest in the estate until the minor reaches 19 years of age.
The Family Law Act also has provisions for the appointment of a trustee for minors, which are not limited to inheritance, but may apply anytime a minor is entitled to property. This is set out in section 179:

179 (1) Subject to subsection (2), the Supreme Court on application may appoint one or more persons as trustees over
(a)particular property to which the child is entitled, including any property derived from the property or from the disposition of the property, or
(b)all property to which the child is entitled at the time the order is made and to which the child becomes entitled while the order is in effect, except property
(i)identified in the order, or
(ii)over which a trustee already has authority.
(2)The Supreme Court may appoint a trustee only if satisfied that it is in the best interests of the child to do so, on consideration of all of the following:
(a)the apparent ability of the proposed trustee to administer the property;
(b)the merits of the proposed trustee's plan for administering the property;
(c)the views of the child, unless it would be inappropriate to consider them;
(d)the personal relationship between the proposed trustee and the child;
(e)the wishes of the child's guardians;
(f)the written comments of the Public Guardian and Trustee;
(g)the potential benefits and risks of appointing the proposed trustee to administer the property compared to other available options for administering the property;
(h)if the Supreme Court is considering making an order under subsection (1) (b), that the interests of the child are likely better served by an order made under that subsection than by an order made under subsection (1) (a).
(3) An order made under this section to appoint a trustee may do one or more of the following:
(a)require the trustee to deliver the trustee's accounts at specified intervals for the examination and approval of the court;
(b)limit the duration of the trusteeship;
(c)specify or limit the types of investment in which the trustee may invest the property;
(d)provide for compensation of the trustee including, without limitation, setting rates and specifying when the compensation may be taken;
(e)require the trustee to give security in any form the court directs;
(f)make any other order the court considers appropriate.
(4)Except as provided for in an order made under this section, the Trustee Act applies to the trustee and the trust.
I should note also that a small amount, currently up to $10,000, may be paid to a child’s guardian with parental responsibilities without a court order. This is set out in section 178 of the Family Law Act.

Sunday, April 21, 2019

Quinn Estate Appeal

In Quinn Estate v. Rydland, the British Columbia Court of Appeal had held that a pour-over clause in former NHL coach Pat Quinn’s will is invalid. As I wrote in my post about the British Columbia Supreme Court decision in this case,

Mr. Quinn and his wife Sandra Quinn settled a trust in the United States which dealt with assets in the United States. Mr. Quinn was an American citizen, and Mrs. Quinn had U.S. Green Card, but they lived in British Columbia. Their U.S. lawyer also draft a will for Mr. Quinn dealing with his assets in Canada. The will provided that the residue of his Canadian Estate would “pour over” into a U.S. trust, referred to as the Quinn Family Trust. 
The issue in this case was whether the distributive provision of the Canadian will is valid under British Columbia law. The will was signed by Mr. Quinn in the presence of two witness in accordance with the requirements of section 37 of the Wills, Estates and Succession Act. The will itself was formally valid. The difficulty was the “pour over” clause, which I understand is valid in at least some states. The terms of the Quinn Family Trust allowed Mr. and Mrs. Quinn to amend it. Because they could amend the trust, the beneficiaries could be changed without compliance with the requirements of section 37.

The Trust was amended, but the amendment was a relatively small administrative change that did not change the beneficiaries. But the fact that it could be amended was sufficient for Mr. Justice Funt in the Supreme Court to find that the clause is invalid.

On appeal, Chief Justice Bauman considered whether the clause could be saved on any of three grounds: the doctrine of incorporation by reference, the doctrine of facts of independent significance or section 58 of the Wills, Estates and Succession Act (the “WESA”).

In a will, the will-maker may incorporate another document. The Chief Justice set out the criteria as follows:

[19]         Incorporation by reference simply contemplates that the terms of the trust are deemed to be incorporated into the will. There are five prerequisites to applying the test, per Leal, A. “Testamentary Additions to Trusts” in Proceedings of the Forty-Ninth Annual Meeting of the Conference of Commissioners on Uniformity of Legislation in Canada (St. John’s: 1967) 207 at 208:

(1) that the reference in the will must show that the testator intended to incorporate the extrinsic document into the will; (2) the language of the will must be such that it refers to the extrinsic document as one already in existence at the time of the execution of the will; (3) the reference in the will must be sufficiently specific that it identifies the extrinsic document with reasonable certainty; (4) the document offered must be proven satisfactorily to be the one referred to in the will; and (5) there must be satisfactory proof that the document was actually in existence at the time of the execution of the will: see Allen v. Maddock (1858), 11 Moore P.C. 427.

The Chief Justice found that the will did not refer to a document, and Mr. Quinn did not intend to incorporate the trust by reference. Rather Mr. Quinn intended to make a gift “to the trust.” The trust c could not be incorporated by reference “because as of the date of that will, the trust, being amendable and revocable, was not a ‘presently existing document’ and the testator cannot, by his will, create for himself a power to dispose of his property by an instrument not duly executed as a will or codicil.”

The doctrine of facts of independent significance refers to facts that are independent of the will that may affect the disposition of the will-maker’s property. For example, if the will-maker leaves his property to those of his children who survive him, the birth of a child after the will affect how is property is divided upon death. 

Chief Justice Bauman described the doctrine as follows:

That doctrine purports to resolve the issue of potential uncertainty in a will. In the Anglo-Canadian cases it would typically respond to resolve the uncertainty inherent in a bequest: “my car to my partner at the time of my death”. Certainty is achieved by reference to a fact of independent significance (i.e., independent of simply testamentary significance), such as the fact of who the testator’s partner was at the time of his death. So too could the fact of the make and model of the testator’s car have independent significance.

In some jurisdictions in the United States, the doctrine of facts of independent significance has been applied to similar pour-over clauses, but the Court of Appeal rejected the application of the doctrine to pour-over clauses in British Columbia. Chief Justice Bauman wrote:

[31]         In my view, this doctrine should not be seen as a device to validate a pour-over clause like that at bar both as a matter of statutory interpretation and as a matter of principle. When WESA came into force in 2014, it heralded a significant overhaul of the wills, estates and trusts law of the province. Nothing in WESA addresses pour-over clauses. Were the doctrine of facts of independent significance applied to pour-over clauses, it would allow a will-maker to avoid the formalities and the necessity of testamentary intent embodied in WESA so long as the will-maker had sufficient assets in the trust at the time of amending the trust (at least on the American authorities). Had the Legislature intended to allow amendments to a will so long as the amendment presently affected significant assets, the legislature could have provided for it. Extending this doctrine to apply to an amendable, revocable trust would permit a testator to avoid the strictures of WESA and thus defeat the legislature’s intent.
[32]         Applying the doctrine to validate a pour-over clause would also differ in character to the existing applications recognized in the Anglo-Canadian jurisprudence. The traditional applications of the doctrine validate de facto amendments to the will only with regard to limited “facts”. The terms “partner” and “car” are inherently limited. A trust document recognizes no such limit. Extending the doctrine to pour-over clauses would grant testators unlimited power to amend the disposition of their estate without following the strictures of WESA. In my view, this is not an extension the common law should permit

Finally, the Court of Appeal considered whether the curative provision in section 58 of the WESA could save the pour-over clause. Section 58 allows the court to give effect to a document or record that does not comply with the formal signing and witnessing requirements for a valid will if the court finds the document or record reflects the deceased person’s testamentary intentions. (I have co- written a paper on section 58, which you can find here.)

The Court held that section 58 has no application. The will met all of the formal requirements, and Mr. Quinn did not intend for the trust to be a will. Chief Justice Bauman wrote at paragraph 37,

That s. 58 is inapplicable here is made stark when we ask what “record or document or writing or marking on a will…” is to be ordered “fully effective” under WESA per s. 58(3). Ms. Rydland does not seek probate of the QFT; rather, she seeks to validate the sixth clause. That clause is part of a will that complies with the formalities. It seeks to create a vehicle — the QFT — that would allow the will-maker to circumvent the formalities altogether. Section 58 simply has no application to that circumstance. The chambers judge did not err in declining to apply s. 58 here.

What is my own view? From a practical perspective, I think it unfortunate that a pour-over clause to an amendable trust is invalid. In some circumstances, it might be a useful tool. Family trusts appear to be quite popular in some U.S. states, such as California. I don’t see any harm from a policy perspective in, for example, allowing someone with a trust in California with California resident beneficiaries to create a will for his British Columbia assets that pours over to his California trust.

I also think this case illustrates an incoherence in our succession law. Supposing that Mr. Quinn’s will made no reference to the trust, but he simply named his wife as the beneficiary of his estate. Suppose he also told her that she was to distribute his estate in accordance with the trust, and she agreed. Supposing further that he decided to amend the trust after he made the will, and he communicated the changes to her and she agreed to deal with the estate in accordance with those changes. Provided that the will did not itself refer to the fact that she would receive his estate as a trustee, this arrangement would be a valid secret trust under British Columbia law, and he would be able to change the terms right up to his death, without complying with the formal requirements for a valid will. I am not advocating the use of secret trusts in this manner as a good estate-planning tool, but merely highlighting the inconsistency.

Saturday, March 23, 2019

Trial Lawyers Association of B.C. Estate and Family Law Summit

I am going to be speaking at the Trial Lawyers Association of B.C. Estate and Family Law Summit on Friday, April 5, 2019 at the Vancouver Convention Centre. I will be on a panel with barbara findlay Q.C., and Monique Shebbeare, moderated by Zara Suleman. Our topic is "Families Look Like This: A Closer Look at Polyamory, LATS and ART for the Family and Estate Bar."

For more information about the conference, you can read the schedule here.

Sunday, March 03, 2019

Proposed Amendments to the Wills, Estates and Succession Act

The British Columbia government has introduced changes to the Wills, Estates and Succession Act. The Attorney General Statutes AmendmentAct, 2019, if enacted, will include changes to sections 16, 61, 130, 131, 151, 152 and 155. I will highlight some of the changes to sections 151 and 155.

Section 151 permits a beneficiary of an estate to apply to court to make or defend a claim on behalf of the estate if the personal representative does not do so. For example, a beneficiary of an estate may wish to make a claim that a house that the surviving joint tenant of the deceased’s house holds the house in trust for the estate, while the surviving joint tenant claims beneficial ownership. If the personal representative refuses to pursue a claim, or perhaps the personal representative is also the surviving joint tenant, the beneficiary may apply to court pursuant to section 151 for permission to bring the claim.

The current wording in section 151 only allows “a beneficiary or intestate successor” to apply. What if the person who wishes to make a claim is not currently a beneficiary of the will, but is making a claim as a child or spouse of the deceased to vary the will so that she will receive a share of the estate? Section 151 does not appear to apply to the wills variation claimant to allow her to apply for leave to sue. This is what occurred in Sharma v. Sharma, 2018 BCSC 1262, which I wrote about here.

The proposed changes to section 151 will allow a wills variation claimant to apply under that section. Instead of referring to “a beneficiary or an intestate successor,” the section will refer to a “specified person,” which is defined as “a beneficiary, an intestate successor or a person who may commence a proceeding claiming the benefit of Division 6 [Variation of Wills] of Part 4 [Wills].”

The current wording of section 151 also requires a person who is given permission to sue on behalf of the estate to bring the claim “in the name of and on behalf of the personal representative.” If the claim is against the personal representative this leads to the absurdity of the same person appearing in the style of cause as both a plaintiff and a defendant. For example, the style of cause may be John Smith as executor of the will of Mary Smith v. John Smith. If I may put it technically, a person appearing as both a plaintiff and a defendant is a pretty big no no.

The proposed changes include amending section 151 so that the claim will be brought “in the name of the specified person and on behalf of the estate,” which will solve the problem of the same person’s name appearing as both a plaintiff and a defendant.

Section 155 provides that the personal representative must not distribute the estate within 210 days of the estate grant, or longer if a wills variation or certain other type of proceeding is brought. However, as the section is currently worded, the personal representative may distribute

(a)   with the consent of all beneficiaries and intestate successors entitled to the estate, or
(b)   by order of the court.
The problem with this wording is that it does not expressly require the consent of a person who is not a beneficiary, but who may bring a wills variation claim. I would argue that the main purpose of this section is to ensure that a person with a wills variation claim has the opportunity to proceed before the estate can be distributed. The 210 days from an estate grant corresponds with the amount of time to both file a wills variation claim (180 days) and serve the claim on the personal representative (a further 30 days).

The proposed amendments will require the consent of

(a) all beneficiaries who have an interest in the estate;
(b) all persons who may commence a proceeding under Division 6 [Variation of Wills] of Part 4 [Wills] in relation to the estate.
This will make it clear that the personal representative will require the consent of the deceased’s spouse and children, whether or not they are beneficiaries of the will.

There is one proposed change that I don’t like. Proposed new section 155 (1.3) provides:

(1.3) Despite subsections (1.1) and (1.2), the personal representative of a deceased person may distribute the estate of the deceased person without the consent of one or more persons whose consent would otherwise be required if the personal representative sets aside all of the following:

(a) all the specific gifts to beneficiaries who have not been located;
(b) a sum equal to the share of the residue of all beneficiaries who
(i) have an interest in the residue, and
(ii) have not been located;
(c) a sum equal to the share of the estate of all intestate successors who
(i) have an interest in the estate, and
(ii) have not been located;
(d) a sum equal to an amount sufficient to satisfy any claim under Division 6 [Variation of Wills] of Part 4 [Wills] in relation to the estate.
Subsections (a), (b) and (c) are fine, but (d) concerns me. The nature of wills variation claims is such that it is difficult to predict how much will be awarded to a claimant. One might think for example if the deceased left his entire estate to two of three children, that setting aside one-third for the disinherited child making a wills variation claim, but it is quite possible that the disinherited child will receive more, particularly if the other children received significant amounts from the deceased outside of the estate. Although the personal representative is supposed to be neutral in wills variation claims, it is not unusual for the personal representative to be hostile towards the claimant and it may underestimate the potential claim. It is preferable to require the personal representative to make a court application before making a distribution without the consent of the wills variation claimant.

Saturday, February 16, 2019

How to Properly Document a Transfer into Joint Tenancy

I have preached caution about the use of joint tenancies as an estate-planning tool to transfer wealth often from a parent to a child, or sometimes to some other relative or friend,. One of the first blog posts I wrote back in September, 2005, was entitled “Six PotentialPitfalls Parents Should Consider Before Transferring Real Estate Into a JointTenancy with Their Children.” There are in fact more than six, and I won’trepeat them all here. Instead I want to focus on how to properly document atransfer into a joint tenancy when the transfer is done as part of an estateplan.

Usually when I write about lawsuits concerning either land held in a joint tenancy, or joint bank or investment accounts, the problem is that the person who made the transfer or contributed the funds did not clearly document her intent at the time of the transfer. There is a presumption that when Mary transfers to her house into a joint tenancy with her daughter Jane for free, she does not intend to make a gift, and that Jane holds her interest on trust for Mary, and for Mary’s estate when Mary dies. This is called the presumption of resulting trust. But it is just a presumption, and there may be evidence that Mary intended to make a gift, rebutting the presumption. Disputes may arise in at least a couple of different circumstances. Mary and Jane have a falling out, Mary sues Jane for the title back, and Jane claims ownership of a half interest on the basis that Mary did intend a gift when she transferred the title. The second, and more common, kind of dispute occurs after Mary’s death. Jane claims the house by right of survivorship as the surviving joint tenant. Her brother Mark, who is also a beneficiary of Mary’s will says that Mary intended for Jane to share the house with Mark in accordance with the distribution in Mary’s will. Mark sues, claiming that Jane holds title to the house on trust for Mary’s estate.

The cases come down to a search for Mary’s actual intent. All too often in those cases that go to trial, the lawyer or notary has not documented his or her meeting with Mary very well. This is not to suggest that the majority of lawyers and notaries do a poor job documenting their files, but usually when the file is well documented, the dispute is resolved well before trial. In the case of joint accounts, lawyers are generally not involved in setting up the account, and unfortunately legal advice is sometimes given by well intentioned, but ill-informed employees of financial institutions without legal training. The only documentation is often the financial institution’s forms which do not illuminate the issue well.

Because disputes involving well-documented transfers of title into joint tenancy usually do not make it to trial, it is rare, but refreshing to see a case in which the lawyer handling the transfer did an excellent job of documenting the transaction and the transferor’s intentions.

Carvel Weaver transferred most of his financial assets into joint accounts with his cousin Vivian Storey and transferred title to his home on Hornby Island into a joint tenancy with her. He made a will in which he left his three surviving children, $5000 each, and Ms. Storey the residue of his estate.

After his death on July 24, 2014, two of his children sued to vary his will on the basis that he had not made adequate provision for them. They also made other claims in respect of his assets, including a claim that Ms. Storey holds the Hornby Island property and other assets on a resulting trust for their father’s estate. This is important because if they were successful and the assets form part of his estate, then the court may award them a share if they are successful in their wills variation claim. But if Ms. Storey is entitled to retain the assets as the surviving joint tenant, then British Columbia’s wills variation legislation does not permit the court to vary the disposition of assets that are not part of the estate, and do not pass under the will.

Ms. Storey brought an application to court to determine whether Carvel Weaver intended to make a gift of the right of survivorship of the Hornby property and other assets to her, or whether she does hold these assets on trust for his estate. In Weaver v. Weaver Estate, 2019 BCSC 132, Madam Justice Horsman held that Carvel Weaver did intend to make a gift of the right of survivorship, and that Ms. Storey does not hold the assets in trust for his estate. The key to the decision was the evidence of Carvel Weaver’s estate-planning lawyer, Andrea Rowe, and the documents she created to implement his estate plan.

Ms. Rowe met with Carvel Weaver alone to take his estate-planning instructions. He told her that he wanted to leave each of his children $5000 and the rest of his wealth to Ms. Storey. Ms. Rowe explained to him that his children could apply to vary his will. He decided to use jointures as a method for passing his wealth to Ms. Storey outside of his estate. Ms. Rowe prepared a transfer document to transfer the Hornby property into both Mr. Weaver and Ms. Storey’s names as joint tenants. Ms. Rowe registered the transfer at the Land Title Office. Fortunately for Ms. Storey, Ms. Rowe also created a number of other documents setting out the intention. These include, a Deed of Gift and Statutory Declaration, as well as a power of attorney for Ms. Storey to sign allowing Carvel Weaver to deal with the title to the Hornby property as well as a transfer of the title back to him.

I will quote from some of the documents below, but the essential nature of the plan was that on the one hand, Carvel Weaver retained control over the Horny property during his lifetime. It was clear that for as long as he lived, Ms. Storey’s interest was limited to the title, and the right of survivorship. If he wanted to take back title or sell the property, he could do so without Ms. Storey having to sign anything further. Because her interest was limited, he could change his mind. On the other hand, it was also clear that he intended to give her the right of survivorship so that if he died before her, she became the full owner of the property, and did not hold it on a resulting trust for his estate.

Madam Justice Horseman quoted parts of the Deed of Gift and Statutory Declaration in her decision. The recitals from the Deed of Gift are as follows:

1.         Carvel hereby transfers the Land to himself and Vivian as joint tenants and in so doing makes a gift of the right of survivorship but no transfer of the beneficial ownership. 
2.         Carvel will sign all further documents and instruments as may be required to effect this transfer (including a Form A Transfer and Property Transfer Tax Form). 
3.         Carvel and Vivian will sign a Power of Attorney by Vivian in favour of Carvel so that Carvel may deal with the Land, unilaterally. 
4.         Vivian will sign a Form A Transfer transferring the Land to Carvel to be held by Carvel.
5.         This Deed of Gift constitutes the legal transfer of the Land by Carvel to Carvel and Vivian as joint tenants. By signing this Deed of Gift, Vivian acknowledges the limited interest being transferred to her.
The Statutory Declaration included the following paragraphs:

3.         Prior to making this decision, I was advised about the difference between an outright gift, creating a tenancy in common, creating a joint tenancy to transfer the right of survivorship (only) and making a gift under my Will.

4.         I chose joint tenancy to grant the right of survivorship because I want Vivian to be able to deal with my Home immediately after my death and I do not want my Home to form part of my estate. Still, I do not intend to grant any present beneficial interest in my Home to Vivian (other than the right of survivorship). 
. . . .
6.         I have required, as a condition of the transfers described above, that Vivian:
a.         grant me a limited enduring Power of Attorney so that I may deal with my Home as I decide in my absolute discretion and without interference from Vivian; and
b.         enter into a Bare Trust Agreement setting out that any interest Vivian may have in the home during my lifetime, other than the right of survivorship, is held by Vivian for my benefit.
Ms. Rowe also drafted a provision for Carvel Weaver’s will, further confirming his intent that assets including his bank accounts held jointly with Ms. Storey were to pass absolutely to her, and that she would not hold her interest on trust for his estate. The provision reads:

I declare that I am aware of the legal significance of the Right of Survivorship as it pertains to joint assets. I declare that any real estate or other assets (for instance, bank accounts) which are owned jointly with Vivian are deliberately held as such so that the Right of Survivorship will apply in the event of my death so that if Vivian survives me, she will own such assets, absolutely, and not on any resulting trust for my estate.
There are two other points that I think important. The lawyer met alone with her client in this case, and the evidence indicates that she explained the documents to him. It is important for a lawyer to make sure that the instructions she receives reflect the client’s wishes, which is why it is important to meet alone when taking instructions, and that the client understands the nature and effect of the documents he is signing (even if not all of the technical language).

I still always urge caution in using joint ownership to transfer wealth on death, but when it makes sense to do so, then intent must be clearly documented. There is more than one way of doing so, but with a significant asset such as a house, this level of documentation is often required to protect the client and the estate plan.

I should note that the decision I have discussed only dealt with one aspect of the children’s claims. They have made other claims which were set for trial. It is possible that they may prevail on some other basis.  

Sunday, February 10, 2019

Supreme Court of Canada Overturns B.C. Court of Appeal Decision in S.A. v. Metro Vancouver Housing Corp

The Supreme Court of Canada, in S.A. v. Metro Vancouver Housing Corp., 2019 SCC 4, overturned the decision of the British Columbia Court of Appeal, a decision I wrote about here. This case deals with the use of a discretionary trust to provide benefits for a person with disabilities without jeopardising other benefits that are means tested. These trusts are sometimes referred to as Henson Trusts, and in many provinces, including British Columbia, are an effective way of preserving the person’s provincial disability benefits.

S.A. is a person with disabilities who lives in a subsidized rental residence provided by the Metro Vancouver Housing Corporation. The Metro Vancouver Housing Corporation also provides additional rental assistance to some of its residents who meet certain criteria, including having assets below a certain amount.

S.A. is the beneficiary of a trust, created by court order varying her father’s will. She and her sister are co-trustees of the trust. The terms of the trust provide that the trustees have discretion to decide if and when to make payments to her. Although she is one of the trustees, she and her sister must make decisions unanimously. The terms of the trust do not permit her to collapse it and take the funds. Accordingly, she does not have the ability to unilaterally take money out of trust for herself.

To receive additional rent assistance, S.A. is required to provide verification of her income and assets. She disclosed to the Metro Vancouver Housing Corporation that she was the beneficiary of the trust, but declined to provide any information about the trust assets on the grounds that it was not relevant to her eligibility. Metro Vancouver Housing Corp refused to consider her application for additional rent assistance, without further disclosure.

She unsuccessfully sought a declaration from the Supreme Court of British Columbia that the discretionary trust was not an asset within the meaning of her tenancy agreement or the application for additional rent assistance. She was also unsuccessful in her appeal to the Court of Appeal.

The majority of the Supreme Court of Canada allowed her appeal and declared that she has the right to have her application for a rent subsidy considered by the Metro Vancouver Housing Corp., and that her interest in the trust is not “an asset” for the purpose of deciding her application.

The outcome turned on the majority’s interpretation of the word “asset” in the contracts between S.A. and the Metro Vancouver Housing Corp. and in particular the Assistance Application. The majority concluded that “asset” refers to something that can be used by the applicant to discharge her debts and liabilities. Because S.A. did not have the control over whether she receives any funds held in trust, the funds are not an asset for the purpose of the application. Madam Justice Côté wrote:

[48]                          For this reason, a reasonable person who interprets the Assistance Application objectively and without reference to the Asset Ceiling Policy would understand the word “assets” to mean an applicant’s property or interest(s) in property that can actually be used to discharge his or her debts and liabilities, including the monthly rent that the applicant owes to MVHC. Given the purpose of the Rental Assistance Program, there is no reason why MVHC would concern itself with a financial resource — like a contingent interest in a trust — that an applicant cannot use in order to pay his or her monthly rent.  
What are the implications of this case? On the one hand, it is important to keep in mind that the Court here considered a particular program and contract. It is possible to define “asset” differently and in a manner that includes an interest in a discretionary trust.  Madam Justice Côté expressly stated that her “reasons should not be taken to suggest that the interest of a person with disabilities in a properly constituted Henson trust can never be treated as an “asset” for any purpose whatsoever.

On the other hand, the analysis is likely to affect how courts interpret the term “asset” in other contracts or legislation in similar circumstances unless the term is defined in a manner that clearly brings interests in discretionary trusts within the definition.

The majority’s analysis of a beneficiary’s interest in a discretionary trust is helpful, and may have implications on the interpretation of legislation, such as some of the recent British Columbia legislation and proposed legislation with vague, circuitous definitions of “beneficial owner.”
Madam Justice Côté characterized S.A.’s interest as follows:

[36]                          It is thus clear that, although the Trustees have an obligation to consider whether to make distributions out of the Trust for S.A.’s care and maintenance, they are not actually required to distribute any of the Trust’s assets either to her or for her benefit. Unlike the beneficiary of a fixed trust (i.e. a trust where the trustee has no discretion as to distributions to the beneficiaries), S.A. therefore does not have an enforceable right to receive anything unless and until the Trustees decide to exercise their discretion in her favour. 
[39]                          The foregoing analysis makes two things clear. First, the terms of the Trust provide the Trustees with exclusive discretion as to whether payments should be made to S.A. While the Trustees must periodically consider whether distributions should be made, they are not obliged to exercise this discretion in any particular manner. Second, the structure of the Trust prevents S.A. from terminating the Trust on her own under the rule in Saunders v. Vautier. As a result, S.A. has no enforceable right to receive any of the Trust’s income or capital: unless and until the Trustees exercise their discretion in her favour, S.A.’s interest in the Trust is akin to a mere hope that some or all of its property will be distributed to her at some point in the future. 
The majority also approval of the decision in Ontario (Director of Income Maintenance Branch of the Ministry of Community and Social Services) v. Henson (1987), 26 O.A.C. 332, aff’d (1989), 36 E.T.R. 192 (Ont. C.A.), from which the name “Henson trust” is derived.