Court Rejects Disinheritance of Children based on “Invalid” Reasons

“Testamentary freedom” is the notion that a will-maker (or “testator”) is entitled to divide her property upon death however, and to whoever, he or she sees fit. In certain circumstances, however, statutes and courts in British Columbia and other jurisdictions have limited this freedom, by requiring the will-maker to provide for certain beneficiaries in the will. In the case of the will-maker’s spouse and children, the will must make “adequate provision for the proper maintenance and support of the will-maker’s spouse or child” , or, if requested to do so after the will-maker’s death, the court can “vary” that will, if it considers it just and equitable to do so. Such claims are now brought under section 60 of the British Columbia Wills, Estates and Succession Act, and, in the case of children, can be initiated by a child of any age, as the courts have determined that a parent may still have a legal or moral obligation to provide for their adult independent child.

However, these obligations of the will-maker are not absolute. Even if a court finds that a will-maker had an apparent “moral duty” to provide for their spouse or child, and did not do so, that obligation can be negated if the will-maker is found to have had sufficiently “valid and rational” reasons to disinherit or reduce that beneficiary’s gift in the will, as this blog has covered in the past.

Conversely, the 2016 decision of Sharma v. Sharma Estate provides an instructive example of a situation where a will-maker’s stated reasons for disinheriting adult children were deemed not to be “valid”, i.e., not based on true facts, and, therefore, could not be used to negate the will-maker’s moral duty. In this case, the specific reason relied upon to disinherit was that the excluded children were said to have already received sufficient gifts during the will-maker’s lifetime, and, accordingly, did not deserve any further gifts from the estate.

The deceased had an estate of approximately 1.75 million and three living adult children at the time of her death, two sons and a daughter. She had made three wills over her life; the first two left 90% of the “residue” of her estate (i.e., the money remaining in an estate after the debts and specific gifts have been removed) to her daughter, 10% to her youngest son, and minimal specific gifts to her oldest son. The third and final will instead granted the youngest son the entire residue, and left nothing to her other two children. The will-maker’s reason for disinheriting her two children, as stated in the will, was that they had already received “plenty of monies” during her life, while her youngest son had not.

The court found that declaration to be factually incorrect. The evidence indicated that the youngest son had actually received significant financial assistance over the course of the will-maker’s life, being given: a monthly living allowance, rent-free accommodation at the will-maker’s home whenever he was not incarcerated, legal fees for several of his convictions, and, after her death, sole ownership of a joint bank account that he had formerly shared with the will-maker worth over $100,000. The other two children, conversely, had received relatively minor gifts over the course of the will-maker’s life – $15,000 for the daughter, and nothing at all for the oldest son.

Given the finding that the will-maker’s reasons were not based in fact, they were deemed “invalid” by the court, and disregarded. Then, the court assessed whether the will-maker had a moral duty to provide for the excluded children, by looking at what a “judicious parent”, informed by “contemporary moral norms”, would do under the circumstances. It found that a judicious parent in the place of the will-maker would have shared her estate amongst her children, and so the court elected to vary the will, granting 34% of the residue of the estate to the deceased’s daughter and 33% to each son.

This case reaffirms that, even when a will-maker has clearly outlined her reasons for disinheritance in the will, a court may still order the will varied if it finds, on the evidence, that the facts underlying those reasons were not true.

Committeeship Applications: the Uragi Case

A growing area in estate litigation is committeeship applications. A committee is a person or institution who is appointed to make personal, medical, legal and/or financial decisions for an adult person (the patient) who is mentally incapable and cannot make those decisions for him or herself. The first stage in the application process is determining on the medical evidence whether the person is incapable. The second stage concerns who ought to be appointed as the person’s committee.

The need for a committeeship may be limited where proper advanced planning is done. Various documents may be prepared by a capable adult in the event that he or she becomes incapable. These documents include an enduring power of attorney (“POA”), representation agreement (“RA”) and an advance directive. As well, a nomination of committee (“Nomination”) can potentially assist the Court when determining who should be committee.

In the recent case of Uragi, 2016 BCSC 1517, there was no dispute that Mrs. Uragi was incapable based on the medical evidence. Thus, Mrs. Uragi was a patient. The main issue concerned the selection of the committee and the Court was called upon to decide who ought to be appointed as Mrs. Uragi’s committee of person and estate – her longtime friends, the Itos, or her niece from Japan, Ms. Yoshimura.

The Itos agreed to the appointment of the PGT as Mrs. Uragi’s committee of person but Ms. Yoshimura would not unless the Court authorized her application to take Mrs. Uragi to Japan to be cared for until her death or adjourned the matter so PGT could investigate her plan. The issue of who should be Mrs. Uragi’s committee of estate also needed to be decided.

Mrs. Uragi had been in Canada since 1975. Her husband had predeceased her and she had no children or family in Canada. The Itos were longtime business associates and maintained a close relationship with Mrs. Uragi even after her husband passed away. In 2003, she executed a POA, Representation Agreement and Nomination in favour of the Itos. During Ms. Yoshimura’s visits form Japan, she became more involved in Mrs. Uragi’s life. Various conflicts arose between the Itos and Ms. Yoshimura as a result.

The applicable legislation, the Patients Property Act (the “Act”) does not provide any criteria for the selection of an appropriate committee. The test for selecting a committee is what is in the patient’s best interests. In analyzing this, the Court considers the following factors:

  • the best interests of the patient and the patient’s family;
  • the patient’s wishes with regard to the identity of the committee;
  • the adult’s autonomy and dignity;
  • the adult’s idiosyncrasies and the way she chose to live her life while capable;
  • the proposed committee’s:
    • previous involvement with the patient or the family;
    • knowledge and understanding of the patient’s situation and needs;
    • level of experience or capability in performing the duties of a committee;
    • plan or scheme for the management of the patient;
  • any potential conflict of interest between the proposed committee and the patient; and
  • the effect on the patient of any conflict among family members.

Where the patient has executed a Nomination, the Court must appoint the nominee as Committee “unless there is a good and sufficient reason for refusing the appointment”. In addition, the Act does not specify a priority scheme for the appointment of a Committee, but the Courts have found that, all things being equal, a family member of the patient for whom the committee is being appointed should be appointed as opposed to an outsider. This is the case unless it is not in the patient’s “best interests”. Mrs. Uragi had executed a Nomination in favour of the Itos but the Court declined to appoint them. The Court also declined to appoint the Niece.

The Court was concerned that due to the deep distrust between the proposed committees, appointing one party to the exclusion of the other would destroy one of the two most important relationships in Mrs. Uragi’s life. Ultimately, the Court appointed the PGT as the committee of Mrs. Uragi’s person and estate which is somewhat unusual where others are prepared to act as committee but not unusual where the conflict between willing committees is so great as to potentially upset the patient given the best interests test.

Of note, the Act will be replaced in the future with provisions under the Adult Guardianship Act and in the latter statute, the Court has the ability to divide duties and responsibilities if more than one guardian (currently called a committee) is appointed. It will be interesting to see how this provision is applied in situations like Mrs. Uragi’s where more than one person is willing to be committee but those people have conflicts with each other.

 

High evidentiary threshold to rebut the presumption of resulting trust

I blogged a few years ago on the old law of presumption of advancement and new law of presumption of resulting trust established in the landmark Supreme Court of Canada Pecore decision. Click here for my previous blog.

The presumption of resulting trust applies in estate contexts when a parent gratuitously transfers his or her assets to an adult child.  The court will presume that the child is holding the property in trust for the parent’s estate, unless the child can prove that the transfer was intended to be a gift. In other words, the child has to rebut the presumption of resulting trust if the child claims that the transfer was a gift.

Children who attempt to rebut the presumption of resulting trust need strong evidence that their parent intended to gift them the property.  A recent BC judgment in McKendry v McKendry, 2015 BCSC 2433 illustrates that the evidentiary threshold is high to rebut the presumption of resulting trust.

In Mckendry, the deceased died in 2012 and was survived by five adult children, one son and four daughters. In 2008, she transferred title to her home into a joint tenancy with the son. At the time of the transfer, the deceased wanted the son to hold the home in trust for her estate. In that regard, she made two separate trust declarations outlining how the son would divide the home amongst all her children upon her death.

In 2010, the deceased decided to gift the home to the son. She provided in her Will that she gave the home to her son and the residue of her estate to her four daughters in equal shares. However, the deceased did not take steps to transfer the title of the home into the son’s name only. Instead, the home remained in the names of the deceased and the son in joint tenancy.

Upon the death of the deceased, her daughters challenged the gift of the home to the son, arguing that it was held in trust for their mother’s estate.  The court held that, because of the conflicting evidence in the form of the deceased’s trust declarations and her Will, the son was unable to rebut the presumption of resulting trust. In particular, the court stated that the son failed to discharge the burden on him to show that in 2008 when the joint tenancy was arranged the deceased intended to make an immediate gift to him of the survivorship interest in the home.

With respect to the 2010 change of intention of the deceased, the court commented that if in 2010 the deceased intended to make a gift of the home to the son, then the deceased failed to take the steps necessary to make a valid, legally binding gift.

The Mckendry decision stands as a cautionary tale to willmakers that they must be certain of their intention before transferring property. It is highly recommended that people consult with professionals to make their intention expressly known and to have professionals guide them through the steps to make a valid and legally binding gift if a gift is indeed intended.

Thank you to Michael Wilson for his assistance with this blog post!