When you make a will, you are creating a document that disposes of your assets on death. Until then, you may deal with your assets as you like. You can sell them, or give them away. You can acquire more. If you change your mind about who will get what on your death, you may change your will. Your will depends on your death for its force and vigour. The gifts in your will are referred to (by lawyers anyway) as testamentary dispositions.
Sometimes the courts find that documents that one might not think of as wills are testamentary. I have written before about a document in which a creditor purported to forgive debts on his death. The court found this document to be testamentary.
So what if a court finds that a document is testamentary?
Each province in Canada has its own rules on what is required to make a valid will. In British Columbia, for example, we have strict requirements that two witnesses sign a will, and on how it is signed. If the court finds a document that is not signed in compliance with the wills legislation, the court may find that the document is invalid.
As I wrote in the first of this series of posts on last week’s Supreme Court of Canada decisions in Pecore v. Pecore, 2007 SCC 17, and Madsen Estate v. Saylor, 2007 SCC 18, in each of these case a father gratuitously transferred funds into joint accounts with a daughter. On the death of the father, the daughter claimed the funds as her own, but the beneficiaries of the parent’s estate claimed ownership.
In the Pecore decision, the daughter met the burden of persuasion that her father intended a gift to her. (I dealt with the presumptions of advancement and resulting trusts in my second post in this series here.)
The majority judgment in the Supreme Court of Canada in Pecore considered whether the joint accounts were testamentary. The argument is that the father, who contributed the funds, exercised control over the funds during his lifetime. He could effectively defeat the interest of his daughter by withdrawing all of the funds during his lifetime. If he intended that his daughter receive the funds at death, then the child’s beneficial interest (the right to use and enjoy the funds) only arose at death. The joint accounts were testamentary in nature, operating just like a will. Because the banking and investment documents creating the accounts didn’t comply with Ontario’s requirements for a valid will, the joint accounts were not a valid method for the father to dispose of the funds to the child at death. That is the argument, but not one that proved successful.
Mr. Justice Rothstein rejected the argument that the joint accounts in Pecore were testamentary. Despite the fact that the father exercised control over the accounts, Mr. Justice Rothstein held that the daughter’s right of survivorship in the accounts (in other words, the right to the funds on her father’s death) arose when the father set up the joint accounts. He transferred a beneficial interest in the accounts when he created them, and not on his death. Therefore, the joint accounts were not testamentary, and did not need to comply with Ontario’s requirements for a valid will.
In my fourth post in this series, I will write about the Supreme Court of Canada’s discussion of whether courts may consider evidence arising of the intentions of the person making the gratuitous transfer arising after the transfer.