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August 10, 2016 - view full issue
What Types of Assets do Courts Consider in Deciding Wills Variation Claims?
In British Columbia, courts have the ability to change a deceased's will, if the court rules that the will fails to make "adequate provision" for a surviving spouse or child of the deceased. This noteworthy judicial power, conferred upon courts by the Wills, Estates and Succession Act (the "WESA"), makes the courts' determination of what constitutes "adequate provision" extremely important.
In measuring "adequate provision", and determining whether a deceased's will has made "adequate provision" for a surviving spouse or child, courts consider a multitude of contextual factors, including assets of the deceased that were gifted to relatives by mechanisms outside of the will.
What is "Adequate Provision"?
The Supreme Court of Canada, in the seminal case of Tataryn v. Tataryni, ruled that calculating "adequate provision" involves weighing the legal and moral 'duties' owed by the deceased to their surviving spouse or child. The court in Tataryn further ruled that, in every case, there will be a wide spectrum of "adequate" or acceptable options available to a will-maker in distributing his or her estate.
In wills variation lawsuits, where a claiming spouse or child seeks to vary the deceased's will, the court has wide discretion when determining whether a deceased will-maker has made "adequate provision", or whether the deceased's will fails to satisfy the duties owed to surviving relatives and ought to be varied on that basis. Ultimately, the decision of what constitutes "adequate provision" is left to the discretion of the judge, who will analyze the various gifts made by the deceased (both during the deceased's lifetime and upon death) and determine whether a judicious will-maker in identical circumstances would have disposed of his or her estate in a similar manner.
Assets Passing Outside of Estate
Courts consider a diverse slew of factors in determining whether a deceased's will adequately provides for a claiming relative: ranging from the particular needs and expectations of the claimant, to the nature of the relationship between the claimant and the deceased. One factor which courts will regularly consider is the value of the deceased's assets that were gifted to the claiming relative outside of the deceased's estate by mechanisms independent of the will.
A deceased's will distributes assets personally owned by the deceased at the time of his or her death, these assets are said to pass through the deceased's estate. A deceased may have held other assets which, for one reason or another, do not pass through the will, and instead pass to a claiming relative or beneficiary by channels outside of the estate: I will refer to these assets as "Extra-Estate Assets".
For example, when real property is co-owned by spouses as joint tenants and one spouse dies, the deceased spouse's interest passes (outside of the estate) by way of survivorship to the surviving spouse. These Extra-Estate Assets are not subject to the terms of the deceased's will, and are instead distributed by operation of mechanisms outside of the estate. The same can be said of interests under certain insurance policies, RRSPs and RRIFs.
Judicial Consideration of "Extra-Estate Assets"
In determining whether a deceased's will makes "adequate provision" for a claiming spouse or child, courts routinely consider any Extra-Estate Assets received by that claiming relative, in addition to the assets received by operation of the will.
Take for example the 2015 case of Wong v. Cheung Estateii. In Wong, the deceased did not make any provision for her surviving husband in her will, and her husband applied to court to have the will varied in his favour. Based on a consideration of contextual factors (including the length of the marriage and the spouses' respective contributions to family property) the court ruled that "adequate provision" for the claiming husband would have been 25% of the total estate.
The deceased's estate in Wong totaled $1,400,000; a 25% share would have resulted in an entitlement of $350,000. However, in determining what constituted "adequate provision" in this case, the court considered all Extra-Estate Assets that the husband had received outside of the estate, and deducted the value of those assets from his $350,000 entitlement.
The deceased's husband in Wong had received $89,000 as the designated beneficiary of the deceased's life insurance policy, and had received an additional $31,375 as the beneficiary of a GIC held by the deceased. The court considered these Extra-Estate Assets (totaling $120,000) and deducted their value from the $350,000 entitlement, arriving at the amount of $230,000 as "adequate provision" for the deceased's husband.
Wong is consistent with past BC judgements, like Eckford v. Van Der Woude Estateiii, a 2013 BC Supreme Court decision affirmed by the BC Court of Appeal in 2014, where the court ruled that even though an asset passed outside of the will, it was still relevant in determining whether the will-maker made adequate provision for the claiming spouse.
Similarly, in Inch v. Stead Estateiv the BC Supreme Court ruled that "although inter vivos dispositions, and assets passing as a result of a right of survivorship pass outside the estate ... the court can consider them when assessing, from the perspective of a judicious person, in the circumstances, whether a [will-maker] has met [his or] her moral obligations".
This point of law is a useful consideration for both will-makers and estate beneficiaries alike: it establishes that all assets gifted to the claiming relative by the deceased (both within and outside the estate) will be scrutinized in determining "adequate provision" in a wills variation lawsuit. Courts will consider both inter vivos gifts (made during the deceased's lifetime) and testamentary gifts (which only take effect on death) in deciding whether "adequate provision" has been made in the circumstances.