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). 

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