Will Is To Be Interpreted As If Written Day Of Will Maker Death

WILL IS TO BE INTERPRETED AS IF WRITTEN DAY of WILL MAKER DEATH
Date: 20 Oct, 2022

It makes common sense that a Will only applies to the net assets owned by the Will Maker, aka the testator, that he or she had on the date of their death.

However, it is not unusual for even experienced Wills and Estates lawyer to ignore the effect of the Succession Law Reform Act section 22.  It is a relatively brief section and we set it out in its entirety.

Will to speak from death

22 Except when a contrary intention appears by the will, a will speaks and takes effect as if it had been made immediately before the death of the testator with respect to,

(a)  the property of the testator; and

(b)  the right, chose in action, equitable estate or interest, right to insurance proceeds or compensation, or mortgage, charge or other security interest of the testator under subsection 20 (2).  R.S.O. 1990, c. S.26, s. 22.

Unless the Will strongly points to being interpreted as of the date of writing rather than the date of death, almost all provisions of a Will are interpreted as if the Will was written the day the Will Maker died.

This lens can have an interesting effect and this was clearly shown in the Ontario case that found its way all the way to the Court of Appeal titled Van Sickle Estate v. Van Sickle.

The Will was written in 1985 when the Will Maker along with her husband owned a fully operating farm. One of the children worked far harder than his siblings in working the farm. However over time, the farm was converted into a rental property whereby it was rented out for others to farm. The son who had devoted, it appears the majority of his life in assisting his parents in operating the farm, was granted an option to purchase the farm at a far lower than market value price.

The plain reading of the Will seemed to grant that option only if it was an ongoing farming operation, rather than the situation that existed as of the date of death.

At the trial level, the judge used the common sense interpretation of the appropriate clause within the Will.

However in 2022, the Ontario Court of Appeal brought everyone back to the actual law, namely the above quoted section of the Succession Law Reform Act. If one interpreted the Will as if it was written the day before death, the farm still met the definition contained within the four corners of the Will and as such the trial decision was overturned.

Section 22 is important and when a Will is being drafted, one needs to take a close look at what may occur with the passage of time.

A careful lawyer will generally object to specific bequests (gifts) of assets to specific people as one never knows what assets one will own on the date of your death.

Conversely, if the Will Maker insists on leaving specific assets to specific people, one needs to spend some time looking at all the possibilities before drafting a Will.

A great deal of time and money was spent on the Van Sickle case, which could easily have been avoided had a hypothetical question been put to the Will Maker at the time of that the Will was written.

Rectification B.C. Style – Part 2

Date: 02 Sep, 2022

Part 2

In part 1 we began our exploration of the law of rectification British Columbia style as set out in the case of Simpson v. Zaste. Part 1 Rectification B.C. Style

The court was of the view that the Will failed to accurately reflect what the will maker husband’s true intention was. There had obviously been a desire by the husband, and as was confirmed in the drafting lawyer’s notes, to leave the shares of his company to his children. At the very least, the children should have received the value of those shares, but subject to the terms of the shareholder’s agreement. Part of that shareholder’s agreement called for life insurance.

This was an appeal from a trial decision which the Court of Appeal felt was overly generous to the children.

To quote the British Columbia Court of Appeal, “to restate the general principles of rectification within the context of WESA rectification aligns the Will with what the Will maker intended to and not what with the benefit of hindsight the Will maker should have intended to do.” The court relied upon the 2016 Supreme Court of Canada’s decision in Canada Attorney General v. Fairmount Hotel.

To meet the terms of rectification, the court required evidence. As stated in the Supreme Court of Canada in Fairmount, that evidence needs to exhibit a high degree of clarity, persuasiveness and cogency before substituting the terms of a written instrument with those said to form the party’s true if only orally expressed intended course of action”. In simple English, if you want the court the fix the Will, the evidence that you need to put before it must be very persuasive, clear and cogent. It is not a subject for speculation.

The appeal court looking at all the facts felt that it was clear that common sense would suggest that the husband never intended to give the net value of his shares to his children and that his true intentions can be gleaned from looking at not only the drafted lawyer’s notes, but the shareholder’s agreement.

It is interesting that this British Columbia Court of Appeal decision specifically pointed out that the Ontario decision in Robinson did not enjoy the provisions of section 59 of WESA. There is no ability as is permitted under WESA for affidavits to be filed expressing what indeed was the intention of the Will maker.

This author would not be surprised if the law in Ontario eventually was expanded to include all of the provisions of the rectification provisions set out in WESA. However, the differences are not that great, and it is important for all to remember that rectification, in other words, a limited ability to fix a mistake made in a Will does exist.

Rectification B.C. Style – Part 1

Date: 02 Sep, 2022

Part 1

One would think a Will is a Will and that we are all bound to follow just the words found in the Will itself.

However, the legal system is more flexible than that and in limited circumstances can fix or rectify a Will that does not address obvious drafting problems.

In the 2022 decision of the Court of Appeal for British Columbia in Simpson v. Zaste, the court in a long and exhaustive decision reviewed the law and facts.

One must be careful in that the law of British Columbia with respect to rectification is not identical to that of Ontario. However, British Columbia is a frequent leading source of the law of Wills. As we saw in 2021, as a result of covid, a number of B.C. provisions were enacted in Ontario.

British Columbia enjoys the Wills, Estates and Succession Act “WESA” which contains many provisions for which there is no Ontario equivalent. However at section 59 of WESA, we find much but not all of the current judge made law on rectification in Ontario. Specifically, WESA holds on an application for rectification of a Will…the court may order that the Will be rectified if the court determines that the Will fails to carry out the Will maker’s intentions because of:

  1. An error arising from accidental slip or admission;
  2. A misunderstanding of the Will maker’s instructions; or
  3. A failure to carry out the Will maker’s instructions.

However the law in British Columbia is the same as Ontario in many respects. WESA does not permit rectification of an error stemming from the Will maker’s lack of appreciation of the legal effect of the terms in the Will. There is a difference between that and an omission in expressing the Will maker’s intention. In other words, if the Will maker turns their attention to an issue, but screwed up and did not appreciate the legal effect of what they were saying, that is an error beyond the court’s ability to correct. EXOTIC ATTACKS ON WILL VALIDITY THE USUAL vs THE UNUSUAL

It is in the Ontario Robinson Estate v. Robinson case, that the court felt that it could not fix an error when the provisions of the Will had been clearly and carefully reviewed by the Will maker. That is not the court’s authority.

Simpson v. Zaste featured the frequently occurring conflict between the children of a first marriage and the second wife. It is unnecessary to review the facts that led to this lengthy decision aside from a general comment. The husband and wife attempted to leave everything to each other in their mirror Wills with the exception that the husband wished to leave his 50% of the shares in his company to his children and his children alone. The difficulty was that the husband was bound by the terms of a shareholders agreement and strictly following the terms of the Will meant that the children would have received nothing.

To be continued and see part 2 of our case comment and blog. Part 2 Rectification B.C. Style

CAREFUL BE VERY CAREFUL DRAFTING A WILL

CAREFUL BE VERY CAREFUL DRAFTING A WILL
Date: 24 Aug, 2022

Almost every Will written in Ontario, and indeed in most jurisdictions, begins with the phrase or something close to it “I hereby revoke all Wills and testamentary dispositions of every nature and kind whatsoever made by me before”.

To the average person this simply means that any previous Will you made is canceled and replaced with your new will.  However, a testamentary disposition is far wider than a Will.  It speaks of what is to occur with respect to any asset upon one’s death. Think about that. That includes insurance policies, beneficiary designations in RRSPs and potentially placing a property in joint tenancy with right of survivorship.

The average person would think that the only way to change a beneficiary designation in a RRSP or life insurance policy would be by changing that beneficiary designation at the very institution where the insurance policy or RRSP was held. That is not the case. The Ontario Succession Law Reform Act sections 51 and 52, permit beneficiary designations and indeed changes and revocations to be made in one’s Will.

One must be very careful.  Generally in the Wills that we draft they contain a provision whereby their spouses are often named as their beneficiary of assets such as RRSP or TFSA.

When the “Full Monty” process is undertaken, this is not the case and we carefully must ensure that there is a consistent approach.  For information about the Full Monty simply use that search term on our website.

So what is the law in Ontario and indeed across Canada when we have a standard Will with a revocation/cancelling clause at the start of one’s Will when there is a prior beneficiary designation for registered assets such as an RRSP or TFSA?

In the 2021 decision by the Honourable Madame Justice Catriona Verner of Alger v. Crumb, a decision of the Ontario Superior Court of Justice, this very question was debated.

It is interesting to note that Justice Catriona Verner had only been sitting on the bench approximately a year when she released her decision.  Justice Verner came to the court with a very serious criminal law background, but not one in civil law and certainly not Wills and Estates. Nonetheless, her legal intellect was brought to bear in this decision and the author heartily agrees with the decision that she reached.

Alger v. Crump is a case dealing with a small estate. But the fact situation is almost universal and as such is an important decision. It reviews the law as this issue has come up a number of times across Canada. If your Will says I revoke my earlier testamentary dispositions, and a beneficiary designation of an RRSP is a testamentary designation, does that mean it’s canceled, does that mean the RRSP now forms part of the estate?

In this decision, Justice Verner had before her a number of decisions holding different positions across the country. She had the decision of Justice McIssac in McNaughton Automotive v. The Co-operators General Insurance.  We discussed in another blog article how that decision was clearly wrong. WHAT HAPPENS WHEN A JUDGE IS WRONG?

Justice Verner closely looked at sections 51 and 52 the Succession Law Reform Act. She also looked at the Ontario Court of Appeal decision in LaCzova Estate v. Madonna House.

The law as concluded by Justice Verner is that it is not enough to make a general sweeping statement revoking all testamentary dispositions.  To meet the provisions of the Succession Law Reform Act, the specific asset such as a RRSP, life insurance policy, RIF or a TFSA must not only be specifically referred to, but also the beneficiary designation that is now being changed must also be stated. Failure to do so means a general statement found at the opening of every Will has no effect.

Common sense, good law.

One must be very careful and appreciate the effect of standard clauses contained in Wills across the land. In Nova Scotia, there is no equivalent to sections 51 and 52 of the Succession Law Reform Act. Accordingly in Nova Scotia, such a general opening phrase will cancel an earlier beneficiary designation.

Quite frankly this demonstrates, that using a Will kit or having a Will prepared by a lawyer that does not specialize in Wills and Estates can be an example of playing with fire.

Can a Power of Attorney be used for entering into a Trust Agreement including the Fully Monty Pt 2

dale (2)
Date: 21 Jun, 2022

In another blog article we reviewed the unhappy fact situation set out in the Selkirk case

The court examined the law on whether or not individuals using a Power of Attorney can enter into a Trust Agreement on behalf of the donor of the Power of Attorney. There were three competing decisions across Canada. However, the theme of those three decisions is exactly in accordance with our firm’s own practice. An attorney can only do those things that are in strict accordance with the terms of an existing Will and as such are not creating a testamentary document, (usually a will).  In plain English, you cannot use a Power of Attorney to write a person’s Will. This is both prohibited under the common law i.e. judge-made law and under the provisions of The Substitute Decisions Act.

But you can create a Trust such as the ones we commonly do under the Full Monty using the Power of Attorney if it is completely in accordance with the Terms of an existing will.  You can facilitate the terms of the will, but you cannot change its terms or effect.

TRUSTS AS A MEANS OF SKIPPING PROBATE and USING A POWER OF ATTORNEY TO SIGN ON BEHALF A MENTALLY INCOMPETENT PARENT

TRUSTS AS A MEANS OF SKIPPING PROBATE
Date: 17 Jun, 2022

At our law firm we have devoted a fair amount of time to perfecting our strategy to avoid or eliminate probate. We have called that strategy the “Full Monty” and it is explained elsewhere on this website.

Learn More : A Strategy To Reduce Or Eliminate Probate Fees – Fully Monty

Learn More : The Full Monty

In the May 2, 2022 decision of Madame Justice Sally Gomery of the Ontario Superior Court of Justice she explored this issue.

Sheila Selkirk died and left behind a set of dysfunctional children. What should have been resolved over a cup of coffee instead became a long winding road of disharmony, distrust and division.

Some interesting and novel legal arguments were made, but quite frankly from this observer’s perspective, the position being taken by the unhappy beneficiary siblings was a loser from the very start.

However, the case does stand for the proposition that properly appointed attorneys under a Power of Attorney for property can enter into a trust declaration for property owned by a mentally incompetent donor. That is more fully explored in our Blog titled  – Can a Power of Attorney be used for entering into a Trust agreement including the Fully Monty.  That is more fully explored in our Blog titled – Can a Power of Attorney be used for entering into a Trust agreement including the Fully Monty

Let’s break this down into a concrete example such as in Selkirk so that one can understand this legal mumbo-jumbo. We have a widow who owns a house and she has a number of children. She already has a Will in which while she largely divides her estate equally amongst her children, but she wants a loan made to one of the children to be repaid before they get their share. The mother told a few of her children that she wanted to avoid probate and its expenses.  However the mother lost her mental capacity shortly before she died and was not able to sign anything.

The brothers went to see their lawyer who prepared a Trust Agreement. The Trust Agreement unfortunately was far briefer and less detailed than the document that our office prepares. The Trust Agreement simply indicated that two children were to be added as joint tenant owners of the home in addition to the ailing mother. The brothers using the Power of Attorney granted to them signed on behalf of their ailing mother. The trust declaration simply indicated that their mother remained the sole beneficial owner, but did not say what was to happen upon her death.

The unhappy beneficiaries after mom died tried to argue that she had explained and promised to all that when she died she wanted her house sold and the net proceeds simply divided equally amongst all of the children.

This argument was doomed to fail from the begin.  Nothing was in writing, the Will was not changed nor could the mother’s existing Will have been changed at this stage of her life.

The case is littered with terrible cross allegations between the siblings of theft and other misdeeds and one cannot but help be saddened and shake their head over a family torn apart over a modest amount of money. The house in question upon sale only realized $326,000.  Divided among six people, this is hardly life-changing. On the other hand, it does provide an interesting factual backdrop, but at what emotional expense.

Why at times Primary and Secondary Wills are Crucial

dale law
Date: 09 Jun, 2022

In late 2021, Justice Nicholson of the Ontario Superior Court released his decision in Greaves Estate vs. Ontario (Ministry of Finance). Mr. Greaves died far earlier than anyone had anticipated. At the time of his death, he controlled three corporations ( not listed on a stock exchange ) and they were the beneficiary of a number of life insurance policies. As a result of his death, the insurance policies death benefits were paid to the companies, the shares of which Mr. Greaves solely owned. The estate now had these insurance proceeds within its four corners and the question became what assets were to be declared when probate is sought. The larger the value of the estate the greater the estate administration tax that the Province of Ontario will levy. That tax roughly speaking is 1.5%. As we discussed earlier, that is a tax that is completely separate and apart from any federally levied income tax. There was much discussion and debate before the court and in the end, the court would not allow the executors of the estate the right to even seek an answer to the question as to whether or not the insurance policies and accordingly the value of the shares should be included for the purpose of calculating the estate administration tax.

The unspoken practical answer is that this never should have been a question. Properly drafted Primary and Secondary Wills would have lumped the shares in a privately held corporation in that portion of ones estate that does not require probate and as such is not subject to the estate administration tax. Just a little bit of estate planning would have gone a long way and would have saved both much money and aggravation in this situation.

Our office regularly prepares Primary and Secondary wills, often as part of a probate avoidance process we call the Full Monty. Details of the Full Monty can be found on our website.

To learn more check out the article – A Strategy To Reduce Or Eliminate Probate Fees – Fully Monty

To learn more check out the illustration – The Full Monty

A CAUTIONARY TALE WHEN OPENING UP AN ONLINE INVESTMENT ACCOUNT

Date: 29 Mar, 2022

Increasingly with our online world, our clients are taking advantage of opening up online stock trading accounts. Wishing to save the fees charged by normal investment and brokerage houses, parties are taking advantage of offers of almost minimal commissions offered by companies such as Questrade. 

It is crucial that when couples open up such an account they appreciate the difference between joint tenancy and tenants-in-common. We link our blog article on that subject here as it bears careful reading.  Joint Tenancy vs. Tenants-In-Common There is a vast difference and the failure to appreciate those differences can have very expensive consequences.

In one particular case, a husband and wife opened up an online account with no human interaction. After the death of one, they learned that the account had been opened in tenants-in-common rather than joint tenancy as they had wished. The net effect was that the surviving spouse needed to apply for probate and pay the significant legal fees and estate administration taxes that were thusly triggered.

JOINT TENANTS vs TENANTS-IN-COMMON

Date: 29 Mar, 2022

There is no more basic yet more misunderstood term in real estate than the difference between joint tenancy vs. tenants-in-common.

These are the two most common methods for multiple people or companies owning a single property. There is a vast difference between the two, despite the similarities in their names. Joint tenancy  or Joint Tenants means there is an automatic right of survivorship between the multiple owners. If two or more people own a single property as joint tenants, upon the death of one of them, their ownership interest automatically flows to the others irrespective of the deceased’s Will. Far and away the most common example is that of the family home. The vast majority of couples purchase their homes and take title as joint tenants. Upon the first of the spouses to die the other becomes with very little legal work or formality the sole registered owner of that property. One’s Will has no effect and is irrelevant.

Tenants-in-common has no right of survivorship. When one of the multiple owners who hold a property as tenants-in-common dies, their interest goes wherever their Will says it goes. This is appropriate for business or partnership relationships. Tenants-in-common permit different percentage ownership interests in a property unlike joint tenancy.   In Joint tenancy every owner must have the same percentage ownership

The difference is immense and careful attention needs to be paid to this. 

Severing Joint Tenancy