Saturday, September 01, 2012

Can You Make a Will That Says Someone Else May Decide Who Will Get Your Assets?

That is one of the issues that Madam Justice Fitzpatrick was asked to decide in Tassone v. Pearson, 2012 BCSC 1262.

Marion Evelyn Pearson, who died on September 21, 2010, left a will which said:

I appoint Ronald Wesley Pearson as executor / executrix of my will.I would like Ronald Wesley Pearson to pay my just debts and funeral and testamentary expenses as soon as possible after my death.
I Devise my estate as follows: and bequeath the real and personal estate, of which I may die possessed to be distributed as seen appropriate by my executor.
I nominate and appoint my son Ronald Wesley Pearson to be executor and trustee of this my will, and if the above named should predecease me, I nominate and appoint my grand-daughter Krista Pearson to be executive and trustee of this my will.
Original of this will is retained by the beneficiary [sic], Ronald Wesley Pearson.
I devise all the residue of my estate to be distributed as seen appropriate by my executor.
Beneficiery [sic] of this my will is my son Ronald Wesley Pearson.
Ms. Pearson had three children, but sadly, all of them died before her, and two of them died before she made her will. Ronald Pearson was the child still alive when she made her will. He had two children, Brienne Pearson and Adam Pearson, both of whom survived her.

Krista Pearson, who was named as the alternate executor, also survived her grandmother Marion Pearson. Ronald Pearson was her uncle.

The case centered on the meaning and validity of the sentence, “I devise all the residue of my estate to be distributed as seen appropriate by my executor.”

Krista Pearson argued that this provision meant that Ronald Pearson would have had the power to give her grandmother’s estate to anyone he wished including himself, if he had been alive at his mother’s death. Because he died first, and Krista Pearson is the alternate executor, she has that power to decide who receives her grandmother’s estate, and can give it to herself.

This kind of power is known as a general power of appointment. It may be contrasted with a specific power of appointment where someone gives another the power to select beneficiaries among a certain group of people.

If you give someone a general power of appointment, it is just like giving that person a gift of the assets over which he or she has the power of appointment. The person you give the power of appointment to can choose to give the assets to himself or herself just as if you simply left the assets to that person.

Ronald Pearson’s two children took a different position. They argued that you cannot validly give someone a general power of appointment in a will, because it offends a rule that you cannot delegate to someone else the power to make a will for you. His children argued that the only beneficiary of the will was their father, and because he died before their grandmother, section 29 (1) of the Wills Act operated to give them what their father would have received.

Section 29 (1) says:

29  (1) Unless a contrary intention appears by the will, if a person dies in the lifetime of a testator either before or after the testator makes the will and that person 
(a) is a child or other issue or a brother or sister of the testator to whom, either as an individual or as a member of a class, is devised or bequeathed an estate or interest in property not determinable at or before his or her death, and 
(b) leaves issue any of whom is living at the time of the death of the testator,
the devise or bequest does not lapse, but takes effect as if it had been made directly to the persons among whom and in the shares in which the estate of that person would have been divisible if the person had died intestate without leaving a spouse and without debts immediately after the death of the testator.

Previous cases in Canada and other common law jurisdictions dealing with the question of whether you can give someone a general power of appointment in a will are not crystal clear. The languages in some of the decisions lend support to the view that a general power of appointment in a will is an impermissible delegation of the power to make a will.

Madam Justice Fitzpatrick upon analyzing the decisions in Canada and England, and considering academic articles concluded that the weight of authority was that you can give someone a general power of appointment in a will. Furthermore, there is no principled reason for not allowing general powers of appointment in wills. What harm is there in allowing someone to give another the power to decide who should receive the donor’s estate in a will?

She wrote:

[72]         I am persuaded here that the decisions in Re Nicholls and Re Beatty's Trust represent the most reasoned and persuasive approach to this issue. As is acknowledged in both cases, general powers of appointment have been a fixture in the drafting of wills in Canada, and specifically, British Columbia for centuries. It would be a dramatic reversal of this practice to now hold that general powers of appointment in a will are invalid or void. As stated by Hoffmann J. in Re Beatty's Trust at 850:
... the invalidation of wide testamentary powers of appointment would involve considerable injustice to the beneficiaries of testators who, relying on cases like Re Park which have stood without adverse criticism for nearly 60 years, have conferred such powers on their trustees.
[73]         As explained by Hoffmann J., it could clearly not have been the intention of such eminent authorities as the Law Lords in Chichester to sweep away this practice on such general terms and without an examination of the historical basis for the granting of such powers.
[74]         Finally, as was stated by Krever J.A., there is no principled reason why, if such powers are valid through an inter vivos instrument, they should not be equally valid if contained in a will. The only basis upon which such a power in either an instrument or will should be invalidated arises where there is uncertainty, which is a concept that is equally applied in respect of other testamentary dispositions, such as trusts. 
[75]         I accept the submissions of Krista and declare that the provisions of Mrs. Pearson’s will create a general power of appointment in her favour and that accordingly, on the face of the will, she is entitled to exercise her discretion as she wishes. In particular, she is entitled to decide that she shall receive the whole of Mrs. Pearson's estate under that general power of appointment.

The next question was how should the will be interpreted? If Marion Pearson intended to give her executor a general power of appointment, why did she go on to say in her will “the Beneficiery [sic] of this my will is my son Ronald Wesley Pearson.”

Madam Justice Fitzpatrick considered the circumstances surrounding the will. She considered the evidence that Krista Pearson had a close relationship with her grandmother when her grandmother made the will.

She found that Marion Pearson intended her son Ronald Pearson to inherit her estate if he survived her, but if he died first, she wanted Krista Pearson to be able to decide who would receive her assets, and that Krista Pearson could give the assets to herself. The provision naming Ronald Pearson as the beneficiary was consistent with this intention, but it was just redundant.

In the result Krista Pearson is entitled to her grandmother’s estate.  

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