Rule of Law

Supreme Court of California, San Francisco

2009-12-21T21:08:00.003-08:00

I took this photograph of the headquarters of the Supreme Court of California, in San Francisco, during my summer holidays with my sons last August.

Garron Family Trust v. The Queen

2009-12-13T20:32:00.005-08:00

The Canadian Government taxes trusts resident in Canada. How can you tell where a trust is resident? Sometimes it is easy, but sometimes it is not.

The Tax Court of Canada released a significant decision concerning the residence of a trust in September. The case is Garron Family Trust v. The Queen, 2009 TCC 450. This case involves some fairly complex tax, estate and corporate planning. I will simplify it a bit to summarize the decision.

Myron Garron and Andrew Dunin built a very successful business manufacturing components for motor vehicles. They and other family members held interests either directly or through a holding company in a company called PMPL Holdings Inc. (which I will refer to as PMPL). PMPL, in turn, held shares in companies engaged in the active business.

In 1998, Mr. Garron and Mr. Dunin arranged for PMPL to be restructured. They received business valuation advice that the shares of PMPL were worth $50,000,000. These shares were exchanged for other new preferred shares that had a fixed value of $50,000,000 (they could be redeemed by PMPL for that amount). New common shares were then issued to two new holding companies, both incorporated in Ontario. The new common shares were arguably not worth much when they were issued, because all of PMPL’s value at the time was in the preferred shares (worth $50,000,000). But, the new common shares owned by the newly incorporated holding companies would increase in value with any increase in PMPL’s value. In other words, the common shares were growth shares. The preferred shares were frozen shares.

The shares of each of the new holding companies were owned by a trust. One trust, called Fundy, owned the shares of one new holding company. The other trust, called Summersby, owned the shares of the other new holding company. The beneficiaries of Summersby are Mr. Dunin, his wife, children and other descendants. The beneficiaries of Fundy are Mr. Garron, his wife, children and other descendants.

The trustee of each of the trusts is St. Michael Trust Corp., which is a company incorporated in Barbados. The shares of St. Michael Trust Corp. were initially owned by an accounting firm in Barbados.

In 2000, the trusts sold their shares in the new holding companies as part of a sale of PMPL and its subsidiary business to a New York firm, Oak Hill Capital Partners, L.P. The sale was for over $500,000,000. On the sale of the new holding companies’ shares, the shares increased in value by something in the neighbourhood of $450,000,000.

I am not sure how much federal and provincial income tax you would pay on a capital gain of $450,000,000 in Canada. It is not something with which I have ever had to concern myself. It would depend in part on what province you were in. I imagine the tax would be in the range of $90,000,000 to $100,000,000 or thereabouts, but I will let an accountant figure that out.

Whatever the amount of capital gains tax payable, Her Majesty the Queen took an interest in receiving those taxes for Canada. Well, at least Canada Revenue Agency did anyway.

But you will recall that the trustee of each of these two trusts was a corporation in Barbados. Canada and Barbados have a tax treaty. It has the title of “Agreement Between Canada and Barbados for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital.” I think I might just call it the Tax Treaty.

The Tax Treaty provided that each country would only tax its own residents on capital gains on the sale of assets (with some exceptions). The trustee and ultimately the beneficiaries of each trust would prefer that the gain on the sale of the shares be taxed by Barbados than by Canada. This is because apparently Barbados doesn’t tax capital gains on the sale of shares.

The trustee of both trusts argued that because the trustee was a corporation resident in Barbados, the trusts were residents of Barbados. Therefore, under the Tax Treaty, Canada had agreed not to tax the trusts. The trustee found support in its position from an earlier Tax Court of Canada decision Thibodeau Family Trust v. The Queen, 78 DTC 6376, in which the Court held that the residence of the trust for tax purposes was the place where the majority of the trustees were resident.

But Canada Revenue Agency begged to differ. It argued that the real management and control of the trusts were in Canada, rather than Barbados.

In order to decide the case, Judge Woods first considered the tests for determining residency of a trust in respect of the Income Tax Act. She held that the appropriate test was similar to the test for determining the residency of a corporation: where is the central management and control of the trust. She rejected the argument that the residency of the trustee by itself determined the residence of the trust.

Judge Woods based her decision on a number of factors, which she found indicated that the central management and control of the trusts was Canada, rather than Barbados. She found that the role of the trustee was to sign legal documents for the trust and provide some administrative services, rather than to make important decision for the trust. The facts she considered include the following:

1. The terms of each trust provided for a protector, who had the power to remove and replace the trustee of the trust. Mr. Dunin and his wife, in turn, had the power to remove the protector of the Summersby trust, while Mr. Garron and his wife had the power to remove the protector of the Fundy trust. Indirectly, each family had the ability to remove the trustee of its trust.

2. The trustee’s internal memorandum indicated that the trustee expected to play a limited role in the trusts transactions and defer to Mr. Dunin and Mr. Garron.

3. The trustee appeared to have a limited role in making investment decisions. The trustee used Mr. Dunin’s and Mr. Garron’s advisors. The investment advisors in turn were given discretion in making investments by the trustee, allowing the investment advisors to take direction from Mr. Dunin and Mr. Garron.

4. Judge Woods found that there was little documentation indicating that the trustee played a large role in managing the trusts. The documentation that was provided indicated that the trustee had a limited role.

5. The trustee was at the time of the sale of the shares owned by an accounting firm, and did not have specialized expertise in managing trusts.

The result is that the trusts will have to pay capitals taxes in Canada on the gains of approximately $450,000,000 on the sale of the shares of the holding companies.

Judge Woods appears to have based her decision on the totality of these and other factors, rather than on any one consideration alone. The decision demonstrates that if you want to set up an offshore trust to take advantage of tax laws in another country, the trustee will need to exercise real management and control of the trust. It can’t just look good on paper.

This case likely also applies to determinations of the residency of trusts within Canada. For example, there may be tax advantages to having a trust resident in Alberta rather than British Columbia or Ontario. If there is a dispute about whether a trust is resident in one province or another, the court could look at where the central management and control is exercised.

Interrogatories In the New B.C. Supreme Court Rules

2009-12-06T15:19:00.003-08:00

As I wrote in an earlier post, the new rules of civil procedure in British Columbia will come into effect on July 1, 2010.

One of the changes will be to restrict the use of written interrogatories.

Under the old rules, Rule 29 allowed any party to serve written questions on another party to the lawsuit. The party asked to answer the interrogatories could object to specific questions, or bring an application to court to strike the interrogatories if they were “not necessary for disposing fairly of the action or that the costs of answering would be unreasonable….”

Under the new Rule 7-3, if a party wishes to examine another by written interrogatories he or she must first get the other party’s agreement or apply to court to allow the interrogatories.

This rule change is unfortunate, and will have the opposite effect of what is intended. Instead of reducing the costs of lawsuits, in many cases it will increase the costs.

I have used interrogatories frequently in Wills Variation Act cases, where the financial circumstances of the person making the claim and of the defendants is usually quite relevant to the case. By submitting questions concerning a party’s financial circumstances in writing, the other party has an opportunity to go through his or her records, and review the questions and answers with his or her lawyer, to make sure the responses are accurate. This is much more effective than asking the same questions during oral examinations, where the other party often does not know the answers off-the-top of his or her head.

Furthermore, as often as not, another party to a lawsuit lives in another part of Canada. It is not uncommon in Wills Variation Act cases for other parties to live all over the world. In some cases, written interrogatories can be an inexpensive substitute for paying for them to come to British Columbia to answer questions in oral examinations for discovery.

Under the new rules, if another party does not agree to answer interrogatories, you may be able to get a court order allowing interrogatories (especially when used to elicit information from someone who lives far away), but it is an extra step, which adds to the expense.

Fraudulent Conveyances - Do You Have to Prove Dishonesty?

2009-11-28T19:07:00.003-08:00

A recent decision of the British Columbia Court of Appeal confirms that a creditor does not have to prove that a debtor acted dishonestly to set aside a conveyance as a fraudulent conveyance. It is sufficient for the creditor to prove that the debtor did so with intent to delay or hinder creditors, including future creditors.

William Botham was a shareholder and the principal of Botham Holdings Ltd, which held $20 million worth of real estate. After the company sold some of its real estate at a substantial profit, Mr. Botham decided to go into a joint venture car leasing business with a friend.

On the basis of legal and tax advice, Mr. Botham incorporated a new company, Braydon Investments Ltd., and through a series of transactions transferred Botham Holdings Ltd.’s assets to Braydon. Botham Holdings Ltd. went into the joint venture car leasing business. The reason Mr. Botham did not simply incorporate a new company for the car leasing business was that there were tax advantages in using Botham Holdings Ltd.

Unfortunately, the car leasing business failed. Botham Holdings Ltd. went bankrupt. The trustee in bankruptcy sought to set aside the transfer of assets to Braydon so that those assets would be available to the creditors of Botham Holdings Ltd.

The trustee in bankruptcy relied on section 1 of the British Columbia Fraudulent Conveyance Act, which says:

1 If made to delay, hinder or defraud creditors and others of their just and lawful remedies
(a) a disposition of property, by writing or otherwise,
(b) a bond,
(c) a proceeding, or
(d) an order
is void and of no effect against a person or the person's assignee or personal representative whose rights and obligations by collusion, guile, malice or fraud are or might be disturbed, hindered, delayed or defrauded, despite a pretence or other matter to the contrary.

Mr. Botham acknowledged that the assets were transferred out of Botham Holdings Ltd. to insulate them from creditors of the car leasing business. But he argued that there were legitimate business and tax planning purposes for the transactions.

At trial, in Abakhan & Associates Inc. v. Braydon Investments, 2008 BCSC 1547, Mr. Justice Kelleher found that Mr. Botham had not acted dishonestly. But the court held that the transfer of assets was a fraudulent conveyance and was of no effect against the trustee in bankruptcy.

Braydon Investments Ltd. appealed to the British Columbia Court of Appeal. The reasons for judgment are at 2009 BCCA 251.

Chief Justice Finch upheld Mr. Justice Kelleher's decision and dismissed the appeal. He held that it was sufficient if one of the reasons for the transactions were to delay or hinder creditors, including future creditors. The court found that the words “by collusion, guile, malice or fraud” in the Fraudulent Conveyance Act were meaningless. They were likely a holdover from when the Act had penal sanctions. These sanctions were held to be unconstitutional and have been repealed.

Although Mr. Botham could have incorporated a new company to carry out the joint venture car leasing business--in which case the assets of Botham Holdings Ltd. would have been insulated from creditors of the car leasing business—having chosen to use Botham Holdings Ltd. because of some tax advantages, he could not then transfer the assets to delay or hinder creditors.

The result is that the assets Botham Holdings Ltd. transferred to Braydon Investments Ltd. will be available to satisfy the claims of Botham Holdings Ltd.’s creditors.

My Last Wills and Estates Presentation of 2009

2009-11-24T23:00:00.003-08:00

I am pleased to be a guest speaker at an estate planning seminar hosted by Shannon Jones, Wealth Advisor, of ScotiaMcLeod in Kelowna, on Monday November 30, 2009 from 5:00 pm to 6:30 pm.

We’ll discuss 3 key strategies that will put your mind at ease:
► Using trusts to lower taxes and protect your beneficiaries
► Minimizing administration costs to leave more in your estate
► Making sure your Executor knows what they are getting into.

The focus of my talk will be on using testamentary trusts both for asset protection for beneficiaries and for tax planning for beneficiaries.

Anyone who is interested in attending may RSVP by November 27, 2008, Shannon Jones at 250.868.5535 or 1.800.663.2609, or by email to shannon_jones@scotiamcleod.com.

Gould v. Royal Trust Corp. of Canada

2009-11-22T20:05:00.001-08:00

One of the factors the Supreme Court of British Columbia may consider in a claim by a child to vary her parent's will is whether the parent has made other provision for her during the parent’s life.

In a recent case, Gould v. Royal Trust Corp. of Canada, 2009 BCSC 1528, Mr. Justice Pearlman refused to vary Silvia Gould’s will even though she made little provision in her will for her daughter, Barbara Gould.

In her will, Silvia Gould left some silver, jewelry, paintings and personal effects to her daughter, but left the residue of her estate, worth a net amount of approximately $900,000, to her three sons. She provided her reasons for not leaving anything in her will to her daughter. She and her daughter were at the time she made the will, joint tenants on a recreational property in Ontario. Barbara Gould would receive the property by right-of-survivorship on Silvia Gould’s death. Silvia Gould wrote in her will that Barbara Gould would receive a roughly equal inheritance to each of her brothers.

Before Silvia Gould died she had transferred her interest in the vacation property to her daughter as a gift. At trial the property was worth $210,000 according to an appraisal.

Mr. Justice Pearlman held that Silvia Gould’s reasons for leaving the residue of her estate to her three sons—that her daughter would receive the vacation property—were rational and valid. In light of the gift of the vacation property to her daughter, Silvia Gould’s dispositions in her will “falls within the range of acceptable dispositions made by a judicious parent in the fulfillment of her moral obligation to the plaintiff as one of the four adult children.” Mr. Justice Pearlman then wrote: “Because I am satisfied that the testatrix [Silvia Gould] made just, adequate and equitable provision for the plaintiff and met her moral claim, the testamentary autonomy of the testatrix is entitled to deference.”

Barbara Gould was, however, entitled to an award of $75,000 for her expenses and the care she provided her mother during the last few years of her mother’s life. Mr. Justice Pearlman awarded the $75,000 for unjust enrichment.

Silvia Gould’s three sons opposed the claim for unjust enrichment in part because Barbara Gould had removed their mother from British Columbia to Guatemala at a time when their mother had dementia, and did not have capacity to consent. She did so without telling her brothers, and despite the fact that her mother had made one of her brothers her representative under a representation agreement.

Although Mr. Justice Pearlman was critical of Barbara Gould’s conduct, he found that she did spend funds on her mother, and took good care of her. She had a reasonable expectation that her mother’s resources would be used for her expenses. Her mother would have had to incur similar expenses if she had remained in British Columbia.

Accordingly Mr. Justice Pearlman found that Barbara Gould had met the criteria for proving unjust enrichment.

The Prescribed Affidavit of Executor in B.C. is Outdated

2009-11-15T12:53:00.003-08:00

In British Columbia, one of the forms required in an application for probate of a will, or letters of administration, is an affidavit of executor, with a schedule of the deceased’s assets, liabilities and distribution. This schedule is often referred to as the “disclosure document.”

The form of affidavit required is set out as Form 69, in Appendix A, of the Supreme Court Rules.

The disclosure document requires the executor to state whether an asset is “within” or “without” British Columbia. This is not always as straightforward as it may seem. It is pretty easy to tell if certain kinds of assets such as land are within British Columbia. But it is much more complex to determine if other kinds of assets, such as financial investments, are within British Columbia.

You can distinguish between physical assets, or “tangible assets,” such as cars and tables, from “intangible assets,” such as bank accounts, shares in corporations, and mutual funds. If the deceased owned mutual funds that are made up of securities of companies located all over the world, where are the funds located?

In law, how do you determine whether intangible assets are within or without British Columbia? This question was answered in respect of securities by Mr. Justice Ehrck, in Re: The Estate of Bessie Bloom, 2004 BCSC 70. The securities are situated in the place where “the financial investment intermediary on whose books the interest of the deceased is recorded and where her personal representative must go to effect the transmission.”

To set out whether an intangible asset is within or without British Columbia, the executor will often have to make inquiries of financial institutions to determine where the deceased’s interest is recorded.

What is the point of requiring an executor to say whether an intangible asset is within or without British Columbia? None.

The Probate Fee Act used to provide that British Columbia probate fees were calculated on assets situated in British Columbia (but not on the value of assets situated outside of British Columbia). Accordingly, it made sense to require executors to disclose whether an assets was within or without of B.C. so that the probate fees would be calculated only on assets within British Columbia.

But the effect of the decision in Re: Bloom was to significantly reduce the probate fees the government collected. Many British Columbians hold investments through financial institutions that keep their books recording the interests of their customers in Toronto or other cities outside of British Columbia.

So the Provincial Government amended the wording of the Probate Fee Act so that probate fees were payable in respect of all “intangible personal property of the deceased, wherever situated,” if the deceased was ordinarily resident in British Columbia immediately before death. This was done by amending the definition of “value of the estate” in section 1. (The constitutionality of taxing assets outside of British Columbia is open to doubt, but it has not as yet been challenged.)

Accordingly, now that the probate fees apply to intangible assets of British Columbia residents, irrespective of the location of those assets, there is no point in making the executor find out and disclose whether those assets are within or without B.C.

But in its haste to protect its tax base, the British Columbia did not amend the prescribed form of the disclosure document so that it is in keeping with the information required to calculate the probate fees. I note that new Supreme Court Civil Rules that will come into affect on July 1, 2010, keep the outdated form of disclosure document (Appendix A, Form 91). In fairness, the reform of the Supreme Court Rules was directed toward law suits, rather than estates. The British Columbia Law Institute has a Probate Rules Revision Project. I hope it will look at this issue.

The probate forms could be amended to require the applicant to state whether to the best of his or her knowledge the deceased was “ordinarily resident” in British Columbia immediately before death. The disclosure document would then deal with intangible assets separate from tangible assets. The applicant would disclose whether each of the tangible assets is within or without B.C., but would not be required to state the location of intangible assets.

San Francisco Hall of Justice

2009-11-14T15:29:00.013-08:00

I took these photographs of the Hall of Justice in San Francisco during my summer trip with my sons. In addition to housing court rooms, a jail and police station, the Hall of Justice has appeared in my favourite movies.

Continuing Legal Education: Wills, Estates and Trusts Conference

2009-11-12T20:33:00.004-08:00

I am going to be speaking on the topic of secret trusts on Friday, November 27, 2009, on the second day of the Continuing Legal Education, British Columbia, Wills, Estates and Trusts Conference.

The conference starts at 9:30 am on Thursday, November 26, 2009. The first day covers estate planning and administration. Registration information for Thursday is available here.

The second day is on estate litigation, and runs from 8:30 am to 3:30 pm. You can find out about registration here.

Those who cannot attend in person, can participate on line. There will also be video repeats throughout B.C.

Both courses will be held at the Pan Pacific Hotel in downtown Vancouver.

Legislation Will Clarify Test for Capacity to Make a Power of Attorney in B.C.

2009-11-07T12:07:00.004-08:00

I wrote a post in December 2005 on the test for capacity to make a power of attorney in British Columbia. The case law is not clear on whether a person must be able to understand the extent of his or her property to meet the legal tests for capacity.

The Adult Guardianship and Planning Statutes Amendment Act, 2007, which was passed by the Legislative Assembly, but is not yet in force, will help clarify the tests for capacity to make a power of attorney in British Columbia.

Section 12 provides as follows:

12 (1) An adult may make an enduring power of attorney unless the adult is incapable of understanding the nature and consequences of the proposed enduring
power of attorney.

(2) An adult is incapable of understanding the nature and consequences of the proposed enduring power of attorney if the adult cannot understand all of the following:

(a) the property the adult has and its approximate value;

(b) the obligations the adult owes to his or her dependants;

(c) that the adult's attorney will be able to do on the adult's behalf anything in respect of the adult's financial affairs that the adult could do if capable, except make a will, subject to the conditions and restrictions set out in the enduring power of attorney;

(d) that, unless the attorney manages the adult's business and property prudently, their value may decline;

(e) that the attorney might misuse the attorney's authority;

(f) that the adult may, if capable, revoke the enduring power of attorney;

(g) any other prescribed matter.

Although this legislation is not in effect as of the date of this post, these criteria are useful guidelines to consider when assessing whether someone does have the capacity to make a power of attorney.

Speaking Engagement on Monday, November 9.

2009-11-05T19:19:00.005-08:00

I am going to be speaking on Monday, November 9th, 7-8:30 PM at the Rotary Centre for the Arts as part of a series on "Securing Your Financial Future," presented by the MacBeth Group, Financial Strategies Inc. The Rotary Centre for the Arts is located at 421 Cawston Avenue, Kelowna, BC, Canada.

I will be speaking about Estate Planning and Wills.

Brad MacBeth will also be speaking. His topic is "Securing Tax Efficient Retirement Income."

The discussion starts at 7:00 PM, and is held in the Pacific Safety Products Boardroom, upstairs in the Rotary Centre for the Arts.

You can RSVP by contacting Brad MacBeth at info@macbethgroup.com .

Is the Executor Required to Probate the Will Before Suing on Behalf of an Estate?

2009-11-01T14:11:00.002-08:00

The answer in British Columbia appears to be not necessarily. But if someone challenges the validity of the will appointing the executor, the court may require that the executor prove the will before the executor can proceed with the lawsuit.

The British Columbia Court of Appeal recently considered this issue in Romans Estate v. Tassone, 2009 BCCA 421. Before he died, Andries Rudolph Romans transferred his house (subject to his right to live in it for ten years) to Angelo Tassone. He transferred the house in December, 2002. He later signed a will dated November 5, 2004, in which he named Carole Cardinal as his executor and left his estate to her.

After Mr. Romans' death, Ms. Cardinal filed a suit on behalf of his estate against Mr. Tassone claiming that Mr. Romans did not have the legal capacity to give the house to Mr. Tassone, and that Mr. Tassone exercised undue influence over Mr. Romans. She also sued the lawyer who acted for Mr. Romans in the transaction, alleging that he was negligent.

Ms. Cardinal asked for the conveyance file from the lawyer, who refused on the grounds that it was subject to solicitor and client privilege. Both Mr. Tassone and the lawyer also challenged Ms. Cardinal’s right to sue on behalf of the estate, arguing that the will appointing her was invalid.

In the Supreme Court of British Columbia (at 2009 BCSC 194), Mr. Justice Savage granted an order staying Ms. Cardinal’s suit against Mr. Tassone and the lawyer until she proved the will in solemn form. In other words, she would have to establish in a trial that the will is valid before proceeding in the claim against Mr. Tassone and the lawyer. Unless the will is valid, she would not have the right to sue on behalf of Mr. Romans’ estate.
Mr. Justice Savage wrote at paragraph 40,

[40] The authorities in my view make several matters clear: (1) an action can be commenced without obtaining probate, as an executor’s authority is based on the
will, (2) before proceeding with an action already commenced, the parties to an action may require that the Plaintiff prove their authority by producing letters probate, (3) the court may require that a Plaintiff prove their authority, by producing letters probate, of its own motion, when appropriate and (4) the court may order a stay of proceedings any time after the commencement of an action where it is in the interests of justice to do so, pending the issuance of letters probate.

After hearing Ms. Cardinal’s appeal, the Court of Appeal upheld Mr. Justice Savage’s order.

On the issue of whether an executor may start a suit without probate, Mr. Justice Low wrote at paragraph 17:

[17] The law seems to be clear that an executor can bring an action in his or her capacity as executor before probate is granted but cannot obtain judgment in the action without probate having been granted: see Chetdy v. Chetdy, [1916] 1 A.C. 603 (P.C.), cited by Allen J. in Harshenin v. Bayoff, [1991] B.C.J. No. 3161 (S.C.).

The Court of Appeal also upheld Mr. Justice Savage’s ruling that the lawyer’s conveyance file is subject to solicitor and client privilege. But if Ms. Cardinal is successful in proving the will, she will be entitled to waive the privilege on behalf of the estate. This is because as executor she would have the authority Mr. Romans had while he was alive.

KGHF Advisor's Free Financial and Estate Planning Seminar on November 4, 2009

2009-10-29T20:49:00.006-07:00

The Kelowna General Hospital Foundation Advisor's Roundtable will be presenting free financial and estate planning seminar on Thursday, November 5, 2009 from 3:30 pm to 5:00 pm at the Missionwood Retirement Resort, 1075 Barnes Avenue, Kelowna, British Columbia.

I will be speaking on powers of attorney and representation agreements.

Laurie Bartley, financial planner, of Canaccord Financial Services Ltd. will also be giving a talk. Her topic is “Maximizing Your Retirement Income.”

Len Vandenberg, accountant at BDO Dunwoody LLP will be presenting “Top 5 Tax Tips when giving to Charity as part of your Estate Plan.”

Please RSVP to Diane Paterson, KGH Foundation - (250) 862-4300, local 7011, or Email - diane.paterson@interiorhealth.ca by November 04, 2009.

This event is sponsored by the Kelowna General Hospital Foundation.

Spouse's Preferential Share Under the New Wills, Estates and Succession Act

2009-10-24T11:51:00.006-07:00

When it is brought into force, the new British Columbia Wills, Estates and Succession Act will increase the preferential share that goes to a spouse of a person who dies without a will.

The current law, section 85 of the Estate Administration Act, provides that when someone dies without a will in British Columbia leaving a spouse and descendents, the spouse is entitled to the first $65,000 of the estate (as well as household furnishings and a life estate in the spousal home). The spouse’s portion of the rest of the estate is one-half, if the deceased left only one child or one-third if the deceased left more than one child. For the purpose of determining the spouse's share, a child who has died before his or her deceased parent is counted if that child left descendents who are living at the intestate parent's death.

Under section 21 of the Wills, Estates and Succession Law Act., the spouse’s preferential share will be increased. The amount will depend on whether the deceased’s descendents are all also the surviving spouse’s descendents or some of them are not the surviving spouse’s descendents.

If the deceased's descendents are all common descendents of both the deceased and the surviving spouse, then the spouse’s preferential share is $300,000. If some of the deceased’s descendents are not common descendents than the spouse’s preferential share is $150,000. The theory behind this is no doubt that if all of the descendents are common to both the deceased and the surviving spouse, they will most likely eventually inherit something from the surviving spouse.

The spouse’s portion of the rest of the estate under the new Act will be one-half, with the other half going to the deceased’s descendents per stirpes.

Let’s look at a couple of examples. Paul dies without a will leaving his wife Sarah, and their two children. His net estate (after payment of his debts and funeral expenses) consists of $400,000 of investments.

Under the current laws, Sarah would be entitled to $176,666.67 ($65,000 plus one-third of the remaining $335,000), and each of their children would be entitled to $111,666.66 (one-half of the remaining $223,333.33).

Under the Wills, Estates and Succession Act, Sarah would be entitled to $350,000 ($300,000 plus one-half of the remaining $100,000), and each of their two children will be entitled to $25,000 (one-half of the remaining $50,000).

Now let’s change the facts a little bit. Paul and Sarah have one child together, but Paul also has a child from a previous marriage. Sarah would receive $275,000 ($150,000 plus one-half of the remaining $250,000). Each of Paul’s two children would receive $62,500 (one-half of the remaining $125,000).

Under the new Act, the surviving spouse will still be entitled to the household furnishings, but there are new provisions concerning the spousal home, which I will discuss in another post.

Vancouver Sun Article on the Wills, Estates and Succession Act

2009-10-18T12:15:00.006-07:00

I was pleased to see that the Vancouver Sun had an article on British Columbia’s new Wills, Estates and Succession Act, which has been passed by the Legislative Assembly, but is not yet in effect. The commercial press doesn’t give a lot of coverage to succession law reform.

I was pleased, I should say, until I actually read the article by Vancouver Sun reporter Ian Mulgrew, entitled “Where there’s a will, there will soon be an end to archaic laws.”

In the Sun article Mr. Mulgrew focused on one aspect of new Act: a change in the burden of proof of undue influence in disputes over wills. It is probably not the change I would pick to write about, if I were writing just one article on British Columbia’s succession law reform. Other changes will affect far more people. But Mr. Mulgrew’s choice of topic is not what bothers me about the article.

I will give you a little background on the change. The common law rule in British Columbia is that if you are challenging a will on the basis that someone exercised undue influence on the maker, that is influence of such a nature that the will does not truly reflect the testator’s intentions, you must prove the undue influence. This follows the usual rule that if you accuse someone of doing something wrong, you must prove it. In practice, it is very difficult to prove that someone procured a will by undue influence.

But the common law has a different burden of proof in cases where a vulnerable person makes gifts during his lifetime to a person who is in a position to dominate that vulnerable person. If you attack the transaction and are able to show that the beneficiary of the assets was in a position to dominate, then the burden is on the beneficiary to prove that the gift was made freely. Usually the beneficiary must then show that the vulnerable person had some independent advice before making the gift.

The Wills, Estates and Succession Act will change the burden of proof of undue influence in wills so that if the person challenging the will can show the beneficiary was in a position to dominate the maker, then the beneficiary will have to show that he or she did not exercise undue influence. This is set out in section 52:

52 In an action, if a person claims that a will or any provision of it resulted from another person
(a) being in a position where the potential for dependence or domination of the will-maker was present, and
(b) using that position to unduly influence the will-maker to make the will or the provision of it that is challenged,
and establishes that the other person was in a position where the potential for dependence or domination of the will-maker was present, the party seeking to defend the will or the provision of it that is challenged or to uphold the gift has the onus of establishing that the person in the position where the potential for dependence or domination of the will-maker was present did not exercise undue influence over the will-maker with respect to the will or the provision of it that is challenged.

Mr. Mulgrew believes that the change is a good one. But that is not the problem I have with the article. I too support the change. When the Ministry of the Attorney General requested comments from the public on the proposed change, I wrote a letter in support (which I have published on my blog here).

The difficulty I have with the Sun article is that Mr. Mulgrew presents the change as one that is needed because lawyers and doctors are going around unduly influencing their clients and patients to put them in their wills. He writes:

I think one of the most important anomalies the government is moving to fix is the law governing what is known as "undue influence." That's when your doctor, lawyer, would-be pal or suddenly loving relative has you sign away property or cash while you're on your deathbed, non compos mentis or too weak to resist.

How often does this happen? According to Mr. Mulgrew, “Happens regularly.”

What examples of cases close to home does Mr. Mulgrew give of lawyers unduly influencing their clients?

Lawyers in New York last year were caught drawing up wills for wealthy clients and inserting each other’s names for multi-million-dollar bequests of art, apartments and cash.

New York is a little ways away. How about some cases in British Columbia?

There are ugly rumours in the legal community that a couple of B.C. lawyers have engaged in the same legerdemain.

I have never heard these rumours, but I have no reason to disbelieve Mr. Mulgrew that there are rumours. I don’t put a lot of stock in rumours, but they could be true. There are thousands of lawyers in British Columbia, and every year the Law Society of British Columbia has to suspend or disbar a handful of them.

But, contrary to what Mr. Mulgrew implies, lawyers unduly influencing their clients to leave them inheritance does not happen regularly. It would hardly be noteworthy that lawyers in New York (about 4000 km away from Vancouver) were caught in such schemes if it happened regularly. It doesn’t happen regularly, either here or in New York for that matter.

How about examples of doctors taking advantage of their patients to get inheritances? Thankfully, Mr. Mulgrew does not try to give any.

The implications against lawyers and other professionals in the article are unfair, and unsupported.

But what bothers me most about the article is that it may tend to frighten vulnerable people away from the very people who may be able to protect them best against undue influence and other types of abuse.

A careful estate planning lawyer will meet alone with a client preparing a will so that the client can speak in confidence. A lawyer will question his or her client about finances and family. If the client says he or she wishes to leave a large gift to someone you would not ordinarily expect the client to benefit, the lawyer can ask why. With appropriate questioning lawyers can often (not always) ferret out undue influence, and find out what the client really wants.

If an estate planning lawyer has concerns about his or her client’s mental capacity to make a will, or to make a large gift, then a careful lawyer will get the client’s permission to speak with his or her doctor to get further insight.

Lawyers can and do refuse to draw wills or handle transactions for people who are not competent, or who do not appear to be acting freely and voluntarily.

Sadly, vulnerable people are much more likely to be victimized by people who are close to them, than by independent professionals. It is far easier for the unscrupulous to benefit by unduly influencing a vulnerable person to make a homemade will, than when a lawyer is involved in the process, and the lawyer insists on meeting alone with the vulnerable person before the will is drawn.

Wills, Estates and Succession Law Act: Variation of Wills

2009-10-10T16:43:00.004-07:00

How will British Columbia’s new Wills, Estates and Succession Law Act affect the Wills Variation Act?

The British Columbia Law Institute had recommended some radical changes to British Columbia’s Wills Variation Act as part of its recommendations on reforming succession law, including limiting the rights of adult children to apply to vary their parents’ wills.

But the Wills, Estates and Succession Law Act, as passed by the British Columbia Legislative Assembly, kept most of the current law intact. Adult children will still be able to apply.

When the Wills, Estates and Succession Law Act is brought into force, the Wills Variation Act will be repealed. But most of the provisions of the Wills Variation Act can be found in Part 4, Division 6 of the Wills, Estates and Succession Law Act.

There will be some changes to the law. Currently a separated spouse may apply to vary his or her deceased spouse’s will, provided that the spouses have not divorced. The definition of spouse under the new legislation will exclude married spouses in some circumstances, including spouses who have been separated for at least two years, if one or both of them had an intention to live separate and apart permanently. Specifically, section 2(2) of the Wills, Estates and Succession Law Act provides:

(2) Two persons cease being spouses of each other for the purposes of this Act
if,
(a) in the case of a marriage,
(i) they live separate and apart for at least 2 years with one or both of them having the intention, formed before or during that time, to live separate and apart permanently, or
(ii) an event occurs that causes an interest in family assets, as defined in Part 5
of the Family Relations Act, to arise, or
(b) in the case of a marriage-like relationship, one or both persons terminate the
relationship.

There is also a new time limit in the new Act. Currently, the Wills Variation Act provides that a lawsuit must be filed within six months of the date of probate or resealing of the will in British Columbia. The new Act will change the limitation to 180 days (I have no idea why).

There is also a new provision (section 61(1)(b)) that the writ of summons starting the lawsuit must be served on the executor “no later than 30 days after the expiry of the 180 day” limitation period. The court may extend the period for serving the writ. Under the Wills Variation Act, the plaintiff has a year from the date the writ of summons is filed to serve it on the executor and the other defendants before the writ expired. An executor might distribute the estate without realizing that someone had sued under the Wills Variation Act. (A prudent executor will check the Court Services Online to make sure no suits have been filed before distributing an estate in British Columbia.)

Until the Wills, Estates and Succession Law Act is brought into effect, the Wills Variation Act will continue to govern wills variation claims in British Columbia.

Is the British Columbia Government Ever Going to Reform Adult Guardianship Laws?

2009-10-07T22:38:00.005-07:00

It's been almost two years since the British Columbia Legislative Assembly passed Bill 29, the Adult Guardianship and Planning Statutes Amendment Act, 2007 .

One of the purposes of the legislation was to modernize British Columbia's adult guardianship legislation. The need for reform is well set out in this backgrounder published by the Ministry of the Attorney General on April 27, 2006:

Adult Guardianship:

Adult guardianship in British Columbia is currently governed by the Patients Property Act, which is over 40 years old and based on nineteenth century English law.

Highlights of Amendments to Adult Guardianship:

Changes to the Adult Guardianship Act will update the legal framework for adult guardianship and ensure that modern principles of guardianship – autonomy, dignity, and the use of the least intrusive and restrictive approach – apply to court-ordered and statutory guardianship by:

Enhancing procedural fairness in the statutory guardianship framework, for example, by providing a right of review, increasing the right of participation by the adult and providing clear options for terminating guardianship when it is no longer needed.
Providing more options to allow guardianship to be tailored to fit an incapable adult’s circumstances, such as allowing for temporary guardianship or guardianship that has limited powers or duration, and allowing the public guardian and trustee (PGT)* to
transfer statutory guardianship to an adult family member or friend.
Clarifying the powers and obligations of guardians, including the duty to encourage the adult’s involvement in decision making and providing for a new code of practice that will be developed over time to set out best practice guidelines for guardians.
Requiring applicants for guardianship to provide forward looking guardianship plans in place of the more limited information currently required.
Facilitating mobility by easing recognition of guardianship orders made elsewhere in Canada.

Although this legislation was passed, it has not been brought into force.

Today the Government of British Columbia introduced Bill 13, Miscellaneous Statutes Amendment Act, 2009. Bill 13, changes the wording is several parts of the Adult Guardianship and Planning Statutes Amendment Act, 2009, by replacing references to a "guardian" under the new legislation, with references to a "committee" under the "Patients Property Act."

According to this Government of British Columbia information bulletin published today:

[The] [a]mendments will enable the incapacity planning provisions of the act, relating to advance directives, enduring powers of attorney and representation agreements, to be brought into force independently of the adult guardianship provisions. This will ensure important changes that strengthen incapacity planning instruments can be brought into force without unnecessary delay.

This implies to me that the adult guardianship provisions will be brought into force with "unnecessary delay." It looks like I will have to explain that "committee" means "adult guardian" for a long time to come.

Superior Court of California, County of Sonoma

2009-10-05T20:38:00.004-07:00

I took these photographs in Santa Rosa, California, in August. I had some difficulty figuring out if this building is a courthouse or a law school. It is both. It is the home of Empire College School of Law, and has two Somona County Superior Court courtrooms.

Re: Elsie Jones

2009-10-03T14:38:00.001-07:00

When you talk to your lawyer, you may want to keep the conversation private. If the lawyer divulges what you say, it could hurt your interests in a law suit. Or you might find it embarrassing.

Privacy is protected in a couple of ways. First, a lawyer has an ethical duty to keep client conversations and other communications with the lawyer confidential unless the client authorizes the lawyer to disclose information.

Secondly, under Canadian law, there is a legal rule called solicitor-client privilege. This rule provides that a lawyer must not, and cannot be compelled, to divulge information from a client in a court proceeding unless the client has waived the privilege. There are some exceptions to solicitor-privilege but not very many. The principle that a client may speak freely to a lawyer to obtain advice without having to worry that what the client says may somehow be used to harm his interest is fundamental in Canadian law.

Although the lawyer’s obligation to kept client communications confidential and solicitor-client privilege are similar, they are not identical.

This is illustrated by the recent British Columbia Supreme Court decision in Re: Elsie Jones, 2009 BCSC 1306. The case is a dispute about whether Elsie Jones was mentally competent to transfer her condominium to her daughter, Maureen Ringrose. Elsie Jones has been declared incompetent and the Canada Trust Company has been appointed as her committee (in other words her adult guardian.) Elsie Jones two sons say that she was incompetent when she transferred the condominium. The Canada Trust Company asked the court to determine if Maureen Ringrose is entitled to keep the condominium, or if it must be returned to Elsie Jones.

When Elsie Jones transferred the condominium, she had a lawyer. When the lawyer was being cross-examined he said that he had also done some estate planning or Elsie Jones at about the same time as the transfer. The lawyer refused to produce his file to the parties to the lawsuit. His position was that it was both confidential and privileged. He would only produce the file if the court ordered him to do so.

Mr. Justice Savage was asked to rule on whether the file should be produced, and, if so, to whom. He agreed with Elsie Jones’ lawyer that it was confidential, and he was right to insist on a court order.

Although the file was confidential, it was relevant to the question of whether the transfer of the condominium was valid. Mr. Justice Savage did not elaborate on how it was relevant, but it does seem that the file would show how the transfer fit into Elsie Jones' overall estate plan, and would likely be helpful in showing her thinking and capacity.

Relevance to the proceeding trumps confidentiality.

Mr. Justice Savage then considered solicitor-client privilege. He found that this was the type of communication protected by the rule. Although not absolute, the rule had very few exceptions. He held that the estate planning file was subject to solicitor-client privilege, and could not be disclosed unless the privilege is waived by the client.

Because Elsie Jones is incompetent, and the Canada Trust Company is her committee, Canada Trust Company has her rights to the file, and can decide whether or not to waive the solicitor-client privilege. Unless they waive it, the file may not be produced in the proceeding.

While relevance trumps confidentiality, solicitor-client privilege trumps relevance.

This decision leaves Canada Trust Company in the difficult position of deciding whether it is appropriate to waive the solicitor-client privilege.

Wills, Estates and Succession Act Passes Third Reading

2009-10-03T12:33:00.004-07:00

Bill 4, the Wills, Estates and Succession Act, has received Third Reading in the British Columbia Legislative Assembly, on September 24, 2009.

This new Act overhauls British Columbia's succession laws. The changes are significant, and those of us who practice in this area will have to spend a great deal of time getting familiar with them. I do think that the changes are for the most part beneficial.

Although the Wills, Estates and Succession Act has been passed, it is not yet in effect. It will be brought into force by regulation. I don't know when, but I expect it will be at least a year, in order to give us all time to learn it.

I will be blogging about some of the specific changes.

Executor Fees May Not Reflect Time Opposing a Wills Variation Act Claim

2009-09-27T10:06:00.002-07:00

Master McCallum’s decision in Re Estate Hautakoski, 2009 BCSC 868, reflects two important points for executors. First, if a spouse or child brings an application in British Columbia under the Wills Variation Act to vary the will, the executor ought not to take an active role in opposing the claim. Secondly, although section 88 of the Trustee Act in British Columbia provides for a ceiling on executor’s fees of 5 percent of the estate capital and income, as well as an annual care and management fee of up to 0.4 percent of the average value of the estate assets, the executor’s entitlement is often found to be less than the ceiling. The law allows a reasonable amount, which is not necessarily the maximum.

The executor of Veikko Tapani Hautakoski’s will was his lawyer. Mr. Hautakoski disinherited his son, Harry Hautakoski, leaving his estate in a trust for his granddaughter. Harry Hautakoski brought a claim to vary the will under the Wills Variation Act on the basis that adequate provision had not been made for him. Veikko Hautakoski’s granddaughter did not oppose the Wills Variation Act claim.

The executor did oppose Harry Hautakoski’s claim. She wanted Veikko Hautakoski’s wishes as set out in the will carried out.

The Wills Variation Act claim was ultimately settled by an agreement and consent order that Harry Hautakoski would receive one-third of the estate, with one-third given to the granddaughter at the age of 25, and the rest held in trust for her.

The executor asked the beneficiaries to approve her accounts. She sought 5 percent of the capital and income of the $1.1 million estate, as well as an annual care and management fee. She estimated that she spent 150 hours on the file, much of which related to opposing the Wills Variation Act claim.

The beneficiaries did not approve of the amount of the fees, and took issue with the role she took in opposing the Wills Variation Act claim.

After quoting from the decision of Mr. Justice Bouck in Quirico v. Pepper (Estate) that the executor’s role is to remain neutral in a Wills Variation Act claim, Master McCallum wrote:

This executor went well beyond that role because she was concerned that the testator’s wishes would not be followed. There is no doubt that ought not to have been her concern. She was required to maintain an even hand as between the beneficiaries and take no position on the merits of the claim. If this executor had followed that course, the time spent by her would undoubtedly have been reduced.

Master McCallum found that in other respects, the executor handled the estate competently, but that it would not be appropriate to award the maximum amounts in the Trustee Act. He wrote:

[17] The beneficiaries took no issue otherwise with the executor’s discharge of her duties. This was an estate involving over $1,000,000 in assets. There was a reasonable level of care and responsibility required of the executor who displayed an acceptable level of skill in dealing with the assets. The estate was competently managed and the executor should be fairly compensated for her work. There is no evidence as to the time required to administer the estate as distinct from the WVA
claim.
[18] The executor’s claim includes a capital fee of the maximum allowable 5% of the gross value of the estate. Given that the estate is not fully distributed and that there is a trust remaining for the testator’s granddaughter, the maximum fee cannot be allowed. In the other circumstances of the estate, the maximum fee would also
not be appropriate. Taking into account all the criteria to be considered, a proper fee on capital for this estate would be 2% of the gross value of the estate. I calculate that fee at $22,370.38 (2% x $1,118,511.90).

Master McCallum did allow 5 percent of the income, and a care and management fee of 0.3 percent annually.

Doucette v. McInnes Reversed by the Court of Appeal

2009-09-19T14:37:00.003-07:00

Joint accounts between parents and children in British Columbia provide lots of work for estate litigation lawyers, and lots of fodder for my blog. A recent case in point is the British Columbia Court of Appeal decision in Doucette v. McInnes, 2009 BCCA 393.

When she died in Victoria, B.C. on April 29, 2004, Mildred Lucy Doucette left surviving her four adult children: Diane McInnes, Louie Doucette, Joslin Clarke and Wayne Doucette. She owned her own home, which was worth about $240,000 at her death, but later increased in value to about $420,000, and a bank account of about $21,000. She also held joint accounts with her daughter Diane McInnes with about $230,000; a joint account with Louie Doucette, worth about $44,000; and a joint account with Joslin Clarke with $150,000.

When Mildred Doucette had made her will in October, 2000, she was estranged from Wayne Doucette and Joslin Clarke. She appointed Diane McInnes and Louie Doucette as executors. She left $5,000 to each of Wayne Doucette and Joslin Clarke. She left her house to Louie Doucette, and the residue to Diane McInnes. She later reconciled with Joslin Clarke, but not with Wayne Doucette.

Mildred Doucette also had a Registered Retirement Income Fund with $55,000. She designated Diane McInnes as the beneficiary.

Wayne Doucette brought a claim under the Wills Variation Act to vary his mother’s will on the grounds that she had not made adequate provision for him. There were two main issues at trial. First, were the surviving joint account holders entitled to the funds, or did they hold them as trustees for their mother’s estate? Second, did Mildred Doucette make adequate provision for Wayne Doucette, or should the will be varied?

When a parent contributes the funds to a joint account with an adult child in British Columbia, the law presumes that the parent did not intend a gift, but that the child holds his or her interest in trust for the parent or the parent’s estate. But this presumption may be rebutted by evidence that the parent intended a gift, in which case on the parent’s death, the child may keep the funds in the account.

An interesting fact in this case is that for most of these accounts Mildred Doucette did not tell her children that she opened the joint accounts with them. She got them to sign account cards without telling them what they were signing. She did not provide the bank with the children’s addresses for the accounts, and all statements went only to her.

Mildred Doucette treated one joint account differently. Diane McInnes knew she was on a joint chequing account with her mother to assist her, and she acknowledged that she held the chequing account for her mother’s estate.

Diane McInnes also found out about the joint account with her sister Joslin Clarke, when she went with her mother to the bank when her mother was sick with cancer, a few weeks before she died. Mildred Doucette wanted to take $50,000 out of the joint investment with Joslin Clarke, and put it into an account for Louie Doucette. Mildred Doucette said that she wanted to transfer the funds to assist Louie Doucette for the time he took off from his business to be with her. Because the investment with Joslin Clarke was not redeemable, she was unable to move the funds.

At trial Mr. Justice Metzger applied the presumption of resulting trust, and held that all of the joint accounts belonged to the estate. He found that there was insufficient evidence that Mildred Doucette intended to make gifts of the funds in the joint account. His decision is reported at 2007 BCSC 1021.

The trial judge varied the will to provide 35% of the estate (including the joint accounts) to Louie Doucette, 25% to each of Diane McInnes and Joslin Clarke, and 15% to Wayne Doucette. In varying the will in favour of Wayne Doucette and Joslin Clarke, he found that Mildred Doucette had not met her moral obligations to them. The estrangement was to a large extent her fault.

On appeal, the British Columbia Court of Appeal changed the decision to allow each child to keep the funds held jointly with that child. A key factor in the decision was the fact that Mildred Doucette kept the joint accounts secret from the children. That being the case, Madam Justice Ryan in the Court of Appeal reasoned, Mildred Doucette did not open the joint accounts (other than the chequing account) for the purpose of allowing her children to assist her with her investments. If they did not know about them, they could not assist her. This contrasts with other cases, where parents open joint accounts with children for convenience so that the children can do the banking, rather than for the purpose of making gifts to their children.

Madam Justice Ryan also considered the evidence that Mildred Doucette tried to take $50,000 out of one account for Louie Doucette, in order to make a gift to him. This was an indication that when Mildred put funds into a joint account with a child, she intended to benefit the child.

After deciding that the joint accounts (other than the chequing account) were not estate assets, the Court of Appeal varied the will to provide Louie Doucette with 70% of the estate (consisting primarily of the house and $23,000) and Wayne Doucette with 30%. In arriving at these amounts, the Court of Appeal took into consideration the amounts each child received from the joint accounts and from the Registered Retirement Income Fund. Although Diane McInnes and Joslin Clarke will not benefit from the assets in the estate, they will keep the funds in the joint accounts each held with her mother.

Wills, Estates and Succession Act Reintroduced in the B.C. Legislative Assembly

2009-09-17T18:01:00.004-07:00

The Wills, Estates and Succession Act has passed first reading in the British Columbia Legislative Assembly.

This legislation was introduced last year, but did not get through all three readings before the session ended. It has been reintroduced as Bill 4.

If it passes and is brought into force, this legislation will significantly reform British Columbia's succession laws.

Joint Tenancy Dilemma: Martinson v. Anniko

2009-09-13T20:24:00.003-07:00

Here’s a dilemma. You own your house with your husband as joint tenants so that on the death of either of you, the survivor will become the sole owner of the house. Although your husband intends for you to receive the house by right of survivorship if you outlive him, he has made a will leaving his estate mainly to his other relatives. This is your second marriage. You have children from your first marriage. Ultimately, you would like to leave something to your children. But your main asset is your interest in the house. If your husband outlives you, he will ultimately leave the house mainly to his relatives and not to your children.

In British Columbia you could sever the joint tenancy by transferring a half-interest in the house to yourself. Then if you go first, you could provide for your children in your will (perhaps with a provision allowing your husband to live in it during his lifetime.) But, if he dies first, you will only have your half-interest in the house.

In the case of your husband dying first, you would be better off leaving the house in a joint tenancy. But if you die first, your children will not receive anything out of the house. Do you sever or not?

With a well thought out, and coordinated plan, nobody should face this dilemma. But people do.

This appears to be what happened in a recent British Columbia Supreme Court decision, Martinson v. Anniko, 2009 BCSC 1104.

Asta Martinson and Hans Martinson married in 1985. Both were 67 years old. They signed a marriage agreement before the marriage, which as amended provided that neither would make any claim to the other’s estate, including any claims under the Wills Variation Act.

Hans Martinson used his assets to buy a home for them in Victoria, which was registered in both of their names as joint tenants. He also put some investments into joint accounts with her.

In his last will dated July 8, 2005, Hans Martinson, left $50,000 to one of Mrs. Martinson’s grandchildren, and the rest of his estate to his nephew and the nephew’s family. His will recites as his reasons for not leaving Mrs. Martinson anything that he had the house in joint tenancy with her, as well as $205,000 investments registered in joint accounts. He also said in his will that he had recently given her a gift of $70,000.

Asta Martinson knew he was making a will that excluded her children. She was concerned that if she died before her husband, her children would not receive much of an inheritance from her. She severed the joint tenancy.

Hans Martinson died before his Asta Martinson. Because she severed the joint tenancy, she only had a half-interest in the house, for which she received $334,000 in 2009.

After he husband’s death, Mrs. Martinson made an application to court to vary her husband’s will under the Wills Variation Act.

When the case went to trial, in addition to the proceeds from the sale of her half-interest in the house, she had $63,000 in a Manulife account, and Registered Income Funds of $33,000. She had spent some of her capital on caregivers and living expenses, but had also given funds to her children.

Mrs. Martinson was 91, and in poor health. She had cared for her husband during his illness, and he was a difficult patient.

Hans Martinson’s estate was worth $476,000.

Mr. Justice Truscott declined to vary Mr. Martinson’s will. Although Mrs. Martinson’s marriage agreement did not bar the court from varying the will, it was taken into consideration in assessing Hans Martinson’s legal and moral obligations to his wife. Mr. Justice Truscott found that the gifts made by Hans Martinson to his wife, as set out in the will, satisfied Mr. Martinson’s obligations. He had rational and valid reasons for making the will he did.

Although the full interest in the house did not go to Mrs. Martinson, as her husband had contemplated in the will, that was caused by Mrs. Martinson’s decision to sever the joint tenancy.

Kelowna Estate Planning Society Battle of the Lawyers

2009-09-07T21:42:00.003-07:00

Tomorrow night I get to be involved in a "Battle of the Lawyers" presentation before the Kelowna Estate Plannings Society. Geoff White, Peter MacPherson, and I will be doing a mock hearing dealing with the issue of who is entitled to funds held jointly between a parent, who dies, and one of the parent's children.

The issue is one that arising frequently in estate disputes in British Columbia, but the facts in our presentation will be a little unusual. A certain fictional crime boss moves his family from New Jersey to Kelowna, British Columbia. He opens a storage jointly with his son, and puts five bags of money, totalling $2.5 million, into the facility. He and his wife die in a suspicious accident. His son claims the funds. His daughter sues, claiming that the funds belong to her father's estate, to be divided equally between her and her brother as beneficiaries of the estate.

Who is entitled to the funds? I don't know yet. That will be for our jury of Estate Planning Society members to decide.