Saturday, July 21, 2012

Re Barrett Estate

Parents may give their adult children financial assistance in unequal amounts, and wish to equalize the benefits their children ultimate receive after the parents’ death through their wills. Sometimes parents put an express clause to that effect is in their wills, called a “hotchpot” clause. The concept is straightforward enough, but its application isn’t always so.

Dwight Wesley Barrett’s will dated February 7, 1992 left his estate to his three sons “taking into account amounts lent or given to each of my sons as per the attached list by myself or my wife and adjusted to present value at the date of my death using the Consumer Price Index as an inflation factor.”

After his death there were three lists setting out amounts of money Dwight Barrett and his wife paid to their children or to others for the benefit of their children. One list was made before Dwight Barrett signed his will. The other two, one in his hand-writing and one in his wife’s, were made after the will was signed.

The issue before the Alberta Court of Queen’s Bench in Re Barrett Estate, 2003 ABQB 986 was what effect if any should be given to the three lists.

The first list was easy. Madam Justice Coutu held that the list that existed when the Will was signed was incorporated by reference into the Will, and could be admitted into probate. Accordingly, the loans or funds advanced that were listed in that list could be brought into account to determine the amount each child would receive under the Will. Madam Justice Coutu noted that because the list was incorporated into the Will, even if the list did not accurately reflect the amounts lent or given to the children, the list would be given effect.

But what about the lists made after the Will was signed? Because they did not exist when the Will was made, they could not be incorporated by reference into the Will. Could any effect be given to these lists?

Madam Justice Coutu held that the transactions recorded in the two later lists would also be taken into account when determining what each of the sons would receive. She found that the lists were accurate (the sons having admitted most of the transactions). She held that the doctrine of ademption by advancement applied, which she explained as follows:

[35] I find that the Court ought to give effect to the transactions recorded in the Post-Will Lists, based on the equitable doctrine of ademption by advancement, also known as the presumption against double portions. This principle as explained in Meinertzhagen v. Walters, L.R. 7 Ch.  670, 41 L.J. Ch. 801 was relied on in O’Callaghan v. Coady (1912), 8 D.L.R. 316 (P.E.I. Ct. Ch.) at p. 318: 

... The principle is that it must be presumed that a father intends equality between the children; and if he leaves the residue to the children, and afterwards makes an advance to one of the children, the general rule is that such advance must be brought into hotchpot, so that the disposition of his fortune, by which he intended to produce equality among the children, may not be altered.
[36] In other words, equity will take care (in fairness to the other children) to see that one who has received an inter vivos gift - the advancement - does not receive the gift again under the will.

Madam Justice Coutu found that she did not have to rely on the presumption that Dwight Barrett intended to have loans and advances he and his wife made to his children after the Will was made taken into account in the division of his estate. She found that there was sufficient evidence that he and his wife intended to have those loans and advances brought into account. She noted that they took the trouble to make the lists, and give them to the lawyer who had drafted their wills.

The Alberta Court of Appeal upheld this decision at 2005ABCA 112.

No comments: