Court Orders Interim Distribution Under Section 155 of the Wills, Estates and Succession Act

In a recent decision, Davis v. Burns Estate, 2016 BCSC 1982, the Supreme Court of British Columbia allowed an interim distribution to be made to a beneficiary of a will under section 155 of the Wills, Estates and Succession Act pending the resolution of a wills variation claim. Section 155 prohibits the personal representative from making a distribution after someone has started a wills variation claim without the consent of the Court. As far as I know,  this is the first reported decision dealing with an interim distribution pursuant to section 155, although there were cases under the now repealed Wills Variation Act considering whether to allow an interim distribution under that Act (which contained a prohibition on distribution during the first six months following probate, but did not expressly prohibit a distribution after the six-month period if a claim had been commenced).

Patricia Burns died on March 17, 2015. In her will dated October 23, 2010,  she left 20% of the residue of her estate to Brent Dale, with whom she lived, and 80% to her friend George Quan, disinheriting her daughter, Leslie Davis. Mr. Dale provided evidence that he and Ms.Burns were in a marriage-like relationship.  The gross value of the estate was over $2.5 million.

Ms.Davis filed a claim under Division 6,  Part 4 of the Wills, Estates and Succession Act, in August 2015, seeking to vary her mother's will on the basis that her mother had not made adequate provision for her.

Mr. Dale asked the court to order an interim distribution of $250,000 to him. Ms. Davis opposed the application unless she too received an interim distribution of $250,000. Similarly, Mr. Quan opposed the application unless an interim distribution were made to him as well.

In granting Mr. Dale's application, Mr. Justice Greyall applied the following criteria from a decision of the British Columbia Court of Appeal in Hecht v. Hecht Estate (1991), 62 B.C.L.R. (2d) 145, decided under the Wills Variation Act:                                                                                                                                                                                                                                                                                                                                                                                                                            

a. the amount of the benefits sought to be distributed as compared to the value of the estate;

b. the claim of the beneficiaries on the testator;

c. the need of beneficiaries for money; and

d. the consent of the residuary beneficiary to the proposed transfer.

In finding that it was appropriate to order the interim distribution to Mr. Dale, Mr. Justice Greyall noted that the net value of the estate available for distribution would likely be at least $2.3 million after expenses and Mr. Dale's share would be $460,000 if Ms. Davis is not successful. If she is successful, it is unlikely that she would receive more than one half of the estate.

Mr. Dale, who was 76, had financial need, with his expenses exceeding his income of $1500 per month. Ms. Burns expressed wishes that Mr. Dale have funds available for travel were unfullfilled becuase of the dealy in distributing the estate as a result of the lawsuit.

Mr. Quan had not brought his own application for an interim distribution, and, accordingly, Mr. Justice Greyall declined to make an order in his favour, but left it open for Mr. Quan to make his own application.

As Ms Davis is not a beneficiary, she is not entitled to an interim distribution. Mr. Justice Greyall found no prejudice to her in making the interim application. She may pursue her claim to a share of the residue expeditiously.

Assets Held in a Discretionary Trust May Affect Some Types of Assistance for Beneficiaries with Disabilities (But Still Often a Good Idea)

[The B.C. Court of Appeal decision in S.A. v. Metro Vancouver Housing Corporation, 2017 BCCA 2, discussed below has been overturned by the Supreme Court of Canada, 2019 SCC 4. You can read my post on the Supreme Court of Canada decision here.]

I have often suggested to clients with children or other intended beneficiaries of their estates with disabilities that they consider creating discretionary trusts for the beneficiary with a disability if the beneficiary is eligible for British Columbia benefits for persons with disability. For the purpose of determining whether someone is eligible for these provincial benefits, discretionary trusts are not included in that person’s assets. The Provincial Government will also allow a person with a disability who has received an inheritance or perhaps a settlement for a personal injury into a trust to qualify for the disability benefits.

I have discussed these trusts, sometimes referred to as Henson Trusts (named after the Ontario decision of The Minister of Community and Social Services v Henson, [1987] OJ No 1121, aff’d [1989] OJ No 2093 (Ont CA)) here. In a fully discretionary trust, the beneficiary has no right to the income or capital, except to the extent that the trustee exercises her discretion to make payments to the beneficiary.

Although discretionary trusts are a good way of making provision for a person with disability, allowing that person to receive provincial disability benefits, while allowing the trustee of the trust to use the assets in a manner that promotes the person’s independence, the trust may still affect the person with a disability’s eligibility for other programs.

This issue was recently highlighted in the British Columbia Court of Appeal decision in S.A. v. Metro Vancouver Housing Corporation, 2017 BCCA 2. S.A. is a person with disabilities who lives in a subsidized rental residence provided by the Metro Vancouver Housing Corporation. The Metro Vancouver Housing Corporation also provides additional rental assistance to some of its residents who meet certain criteria, including having assets below a certain amount.

S.A. is the beneficiary of a trust, created by court order varying her father’s will. To receive addition rent assistance, S.A. is required to provide verification of her income and assets. She disclosed to the Metro Vancouver Housing Corporation that she was the beneficiary of the trust, but declined to provide any information about the trust assets on the grounds that it was not relevant to her eligibility.

She unsuccessfully sought a declaration from the Supreme Court of British Columbia that the discretionary trust was not an asset within the meaning of her tenancy agreement or the application for additional rent assistance. She appealed the decision to the Court of Appeal, and the Disability Alliance B.C. intervened in support of her position.

Mr. Justice Goepel, writing for the Court of Appeal, held that the Metro Vancouver Housing Corporation was entitled to disclosure of further information about the trust assets. Different programs have different eligibility criteria. Metro Vancouver Housing Corporation has limited funds available for additional rent assistance, and information about discretionary trusts is relevant to choosing which applicants to provide the assistance.

Mr. Justice Goepel wrote at paragraphs 47 through 49 and 54 through 58,

[47]         I accept the intervenor’s submissions that discretionary trusts play an important role in promoting the independence and full citizenship of PWDs. That said, discretionary trusts also provide some individuals with benefits unavailable to others who are not beneficiaries of such trusts. Whether such benefits should be considered in determining which individuals should receive public assistance raises difficult public policy questions. I do not accept the intervenor’s broad contention that if this Court allows MVHC to take into account an interest in a Henson trust, it would affect not just this housing assistance program but also every other form of social assistance that relies on an eligibility test based on asset value. Each social assistance program has its own individual eligibility criteria. Whether benefits from a discretionary trust must be taken into account will vary from program to program and depend upon the rules and regulations that govern eligibility for any particular program.

[48]         The issue underlying this litigation is what information MVHC can request from tenants in determining whether to grant rental assistance. In the specific context of this case, the question is whether MVHC can require S.A. to provide additional details of the Trust of which she is a beneficiary over and above the information she has provided to date.

[49]         I note at the outset that many of the submissions have lost sight of this fundamental question. The parties have made extensive submissions concerning the tenancy agreement, the nature of the Trust and the difficulty valuing the Trust given its discretionary nature. In doing so, they have conflated the information that MVHC can consider in determining the eligibility of a tenant for rental assistance and the material it may consider in determining which eligible applicants will actually receive rental assistance. This confusion is perhaps understandable given MVHC’s letter of April 23, 2015 that stated it required particulars of the Trust to determine S.A.’s eligibility for additional rental assistance. With respect, the question is not limited to determining S.A.’s eligibility for rental assistance but is also whether MVHC can take the Trust into consideration in determining how to exercise its discretion as to which of the eligible applicants should receive a rental subsidy.
...

[54]         While S.A. may not have a vested interest in the Trust, she clearly has a beneficial interest. If she wishes to apply for a rental subsidy she must disclose the amount in the Trust.

[55]         MVHC, through the Assistance Application, requires applicants to provide information which MVHC considers to determine whether it will provide rental assistance. Applicants agree to provide such additional information as MVHC may require. In this case, MVHC says it requires further information about the Trust to determine both S.A.’s eligibility for rental assistance and, in the context of a program in which assistance is not available for all eligible applicants, whether S.A. should receive such assistance in preference to other eligible applicants.

[56]         I agree with the chambers judge’s analysis that the Trust is an asset of S.A. and that MVHC is entitled, pursuant to the provisions of the Assistance Application, to the further information it requested concerning the Trust to assist it in determining whether to provide rental assistance.

[57]         MVHC operates a subsidy program for persons in need. The Additional Rent Assistance program is discretionary based on a consideration of factors including financial factors and public housing needs. MVHC is entitled to know the particulars of the Trust so it can properly weigh S.A.’s rent assistance application against other eligible candidates. MVHC is entitled to know the respective financial positions of all applicants in determining how to spend its limited funds.
[58]         I find MVHC is entitled to require S.A., if she wishes to seek a rental subsidy, to provide the information requested regarding the Trust. This includes a statement showing the current balance of the trust fund along with details of all disbursements made since it was established.  Because S.A. has refused to provide the requested information, her application is incomplete.  As set out in the Assistance Application, MVHC will not process incomplete forms. Only when S.A. provides the requested information will MVHC have to decide whether to continue to extend her rental assistance.

Creating a discretionary trust for a beneficiary with disabilities in British Columbia is still a good way to provide for the beneficiary without affecting the provincial Persons with Disabilities Benefits, but may affect eligibility for other types of assistance.