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.

Tuesday, April 14, 2020

Suspension of Limitation Periods in British Columbia During COVID-19 Emergency

The Provincial Government in British Columbia has suspended most limitation periods during the COVID-19 state of emergency in British Columbia from March 18, 2020 for the duration of the state of emergency. This means that in some cases, persons wishing to file claims will have more time to do so.

As I read the Ministerial Order, the suspension will apply to section 61 of the Wills, Estates and Succession Act, which requires that a person who makes a claim to vary a will, must file the claim in court within 180 days of the representation grant. Although this will provide additional time for those who might otherwise have difficulty filing a claim in the current crisis, the downside is that it will also delay the distribution of some estates.

It should be noted that the suspension will not affect those claims for which the limitation period had already expired before March 18, 2020.

The Order in place at the time I am writing is as follows:

1 (1) This order applies during the period that starts on the date this order is made and ends on the date on which the last extension of the declaration of a state of emergency made March 18, 2020 under section 9 (1) of the Emergency Program Act expires or is cancelled. 
(2) This order replaces the Limitation Periods (COVID-19) Order made by MO  86/2020. 
Limitation periods in court proceedings 
2 (1) Subject to subsection (2), every mandatory limitation period and any other mandatory time period that is established in an enactment or law of British Columbia within which a civil or family action, proceeding, claim or appeal must be commenced in the Provincial Court, Supreme Court or Court of Appeal is suspended. 
(2) Subsection (1) does not apply to a mandatory limitation period and any other mandatory time period established under the following enactments:
(a) the Builders Lien Act;
(b) Division 5 [Builders Liens and Other Charges] of Part 5 [Property] of the Strata Property Act. 
Statutory decisions  
3 A person, tribunal or other body that has a statutory power of decision may waive, suspend or extend a mandatory time period relating to the exercise of that power. 

Saturday, March 28, 2020

Williamson v. Williamson

In British Columbia, a separated spouse may make a claim to his spouse’s interest in a trust. In some cases, the claim will be successful, but in others, property held in trust may be insulated from family law claims. The law is quite nuanced. This is illustrated by the case of Williamson v.Williamson, 2020 BCSC 108.

Diane Williamson was a trustee and a beneficiary of a family trust. The property held in trust consisted of an interest in a farm business that had been in her family for generations. The other beneficiaries were her spouse, Robert Williamson and their children. The trust was a discretionary trust in which the trustee had the power to decide if and when to make distributions to any one or more of the beneficiaries. No beneficiary had any entitlement to the property held in trust unless and until the trustee decided to make a distribution to that beneficiary.

On the breakdown of the marriage, Mr. Williamson pursued a family law claim against Ms. Williamson, including a claim to a division of her interest in the trust property.

Ms. Williamson’s father, Lorne Jack was a co-trustee and a “protector” of the trust. As the protector, he had certain powers including the power to remove and replace a trustee and to add beneficiaries.
The lawyer for the trustees gave written notice that the Ms. Williamson would be removed as trustee and her mother appointed as a beneficiary. Mr. Jack intended to make a distribution before the 21st anniversary of the trust and Ms. Williamson would not likely receive any of the trust property. The significance of the distribution before the 21st anniversary is that if the property were still held in trust, there would be a significant amount of tax payable because there would have been a deemed disposition of the property under the Income Tax Act, Canada.

Mr. Williamson asked the court to grant an order essentially restraining Mr. Jack from distributing the property held in trust. Mr. Williamson wished to preserve the property in trust in order to pursue is family law claim to an interest in the trust property.

“Family property,” divisible under the Family Law Act may include a beneficial interest in property held in trust, including in some circumstances property held in a discretionary trust. Section 84 (3) provides that

“…family property includes that part of trust property contributed by a spouse to a trust in which
(a)        the spouse is a beneficiary, and has a vested interest in that part of the trust property that is not subject to divestment,
(b)        the spouse has a power to transfer to himself or herself that part of the trust property, or
(c)        the spouse has a power to terminate the trust and, on termination, that part of the trust property reverts to the spouse.”

If one spouse contributes property to a discretionary trust and retains the ability to distribute the property to herself, then the other spouse may have an interest in the property on the breakdown of the spousal relationship (unless excluded on some other basis).

On the other hand, section 85 (1) excludes interest in property held in a discretionary trust in certain circumstances:

Excluded Property
85.(1) The following is excluded from family property:
(f)         a spouse’s beneficial interest in property held in a discretionary trust
(i)         to which the spouse did not contribute, and
(ii)        that is settled by a person other than the spouse;

In Williamson, Mr. Justice Punnett found that the trust property was excluded property. Ms. Williamson had not contributed the farm property, which had been in her family for generations.

Mr. Jack, who said he wanted to preserve the farm operation as a family business, acted consistently with his powers under the terms of the trust agreement.

Mr. Justice Punnett dismissed the application for restraining orders, with the result that Mr. Jack was entitled to add his wife as a beneficiary and distribute all of the trust property to the exclusion of Ms. Williamson.

Sunday, February 23, 2020

Tribunal Superior Justicia de Catalunya

I took this photograph in Barcelona in November, 2019. 

Saturday, February 01, 2020

Trezzi v. Trezzi: Can You Leave Assets Owned by a Company in Your Will?

I have on rare occasions seen wills in which the will-maker has left assets that are owned by a corporation to beneficiaries. In each case, I have sought instructions to do a new will, leaving the shares, rather than corporate assets. The problem is that a corporation is in law a separate person than a shareholder. Its natural for people to think of say real estate owned by a company as their own, if they own all of the shares of the company, but that is not how the law works.

The problem with attempting to leave assets owned by a company to a beneficiary in your will is that the court may very well find the gift invalid, even if you own all of the shares of the company. I am not aware of cases that have decided that issue in British Columbia, but I know of cases in Alberta and Saskatchewan in which the courts have said that a will-maker cannot effectively leave assets held in a corporation to beneficiaries.

But in a recent decision, Trezzi v. Trezzi, 2019 ONCA 978, the Ontario Court of Appeal upheld a gift in a will of assets held by a company.

Peter Tezzi died on January 8, 2016. He owned all of the shares of Trezzi Construction Ltd. In his will he had clauses that left all of the assets owned to beneficiaries as follows:

·      Clause 3(d), which gave Albert “[a]ll equipment and chattels owned by Trezzi Construction Ltd.”.
·      Clause 3(e), which gave Albert “[t]he real property municipally known as 220 Regina Road, Woodbridge”, which was owned by Trezzi Construction.
·      Clause 3(m), which gave “[a]ll other assets owned by Trezzi Construction Ltd.” in equal shares to Gina, Albert, Emily, and Bianca.
Gina was Peter Tezzi’s wife, Emily and Bianca are their daughters, and Albert, his son from a previous relationship. Gina, Emily and Bianca challenged the gifts of assets in Trezzi Construction, arguing that he because the company owned the assets, and he did not, he could not gift them in a will.

The application judge who heard the argument upheld the provisions of the will, and the Ontario Court of Appeal agreed. Justice M. Jamal, writing for the Court of Appeal, noted under both the terms of the will and Ontario’s Business Corporations Act, Peter Trezzi’s estate trustees had the power to wind-up the company and distribute its assets. Although he did not expressly say that the trustees should wind-up the company, his intent to gift the assets was clear, and they had authority to wind-up the company to carry out his intentions. As set out in paragraphs 20-22 of the reasons for judgment:

[20]       While this clause does not refer expressly to a power to wind-up Trezzi Construction, but rather refers only to converting the estate’s assets into money, I conclude that the gifts do not fail on this basis. As the application judge correctly noted, the executors’ power to wind-up the corporation already exists under corporate law. I also agree with him that the executors implicitly have this authority in their discretionary power to convert the estate’s assets into money. Because Peter’s shares in Trezzi Construction were part of his estate “not consisting of money”, clause 3(a) of his will authorizes his executors to take any steps that may be needed to sell, call in, and convert those shares into money. This would include winding-up the corporation. As such, I agree with the application judge that Peter’s will conferred on his executors the authority to wind-up Trezzi Construction.
[21]       Because of these two independent sources of authority for Peter’s executors to wind-up Trezzi Construction, I would reject Gina’s contentions that the gifts of the assets of Trezzi Construction fail because Peter did not directly own those assets and that upholding these gifts would disregard Trezzi Construction’s separate corporate personality. While it is true that Peter, as the sole shareholder of Trezzi Construction, did not directly own the corporation’s assets, that does not complete the analysis. In substance, Peter’s shares in Trezzi Construction became part of the estate, and Peter effectively directed his executors to wind-up the company and to distribute its assets in accordance with his will, even though he did not own those assets directly. As already noted, the key question thus boils down to whether this was indeed Peter’s subjective intention in his will: see Re Kaptyn Estate, at paras. 126-144. For the reasons stated above, I conclude that the application judge did not err in concluding that this was Peter’s intention.
[22]       It follows that I also do not agree with the conclusions reached in the Saskatchewan and Alberta cases relied on by Gina, Bianca, and Emily, to the extent that those cases can be read as holding that a sole shareholder of a corporation can never effectively gift corporate assets because they are owned by the corporation: see Re Thornton Estate (1990), 85 Sask. R. 34 (Surr. Ct.), at paras. 4-5; Earl v. Wilhelm, 2000 SKCA 1, 183 D.L.R. (4th) 45, at para. 12, leave to appeal refused, [2000] S.C.C.A. No. 124; Re Meier(Estate of), 2004 ABQB 352, 366 A.R. 299, at paras. 16-22; and OryshchukEstate, 2009 ABQB 688, 485 A.R. 379, at para. 35. As noted, the principle of corporate separateness does not complete the analysis of whether a testator who is the sole shareholder of a corporation can effectively gift corporate assets. The court must go on to consider whether that authority exists under corporate law or under the terms of the relevant will. I agree with the application judge that because both sources of authority are present in this case, Peter could effectively bequeath assets held by Trezzi Construction.
Although I like the result of this decision in giving effect to the will-maker’s intentions, I would still be very reluctant to draft a will leaving corporate-owned assets to beneficiaries in British Columbia. If I did, I would want to include provisions as to how this is to be accomplished, and a fall-back position, such as a gift of the shares to the beneficiaries if the gifts were found invalid.

I have a number of reasons for my hesitancy.

First, although a British Columbia court may find this Ontario decision persuasive, a British Columbia court is not bound to follow it, and could decide to follow the decisions in Alberta and Saskatchewan.

Second, in Trezzi, Peter Trezzi was the sole shareholder, and his estate trustee had the power to wind-up the company acting unilaterally. If there were another shareholder, that would not be the case. Even if at the time the time the will is drafted, the will-maker is the sole shareholder, that may change before death. The will-maker could transfer some or all of his shares, perhaps to other family members. His personal representative would no longer have the power to unilaterally wind-up the company.

Third, the company might dispose of the assets left in the will. This problem is not unique to corporate-owned assets. Anytime a will-maker is leaving specific property to beneficiaries, the will-maker should consider making other provisions in case the property is disposed of between the will and the date of his death.