The Even-Hand Rule

If you are acting as an executor, it is important to remember the even-hand rule: unless the Will says otherwise, the executor must treat all of the beneficiaries equally (i.e. with an even hand).

The even-hand rule is not always straightforward because different beneficiaries may receive different interests in the estate.  Consider a case where Beneficiary A has a life interest in an asset and Beneficiary B receives the remainder of that asset when Beneficiary A passes away.  The executor must maintain an even hand between the two beneficiaries.  Practically speaking, it is not a straightforward task.  How does the executor treat two unequal interests equally?

In Flaska Estate, Re, 105 A.C.W.S. (3d) 990 (Ont. S.C.J.), for example, the Court held that the executors did not maintain an even hand between a life tenant and a remainderman when they invested the entire estate in fixed income investments.  As a result of their investments, the executors failed in their duties to the life tenants to maximize the interest income available to them.  In other words, the executors failed to act with an even hand because they did not pay equal consideration to the interests of all beneficiaries.

The even-hand rule arises in other situations as well.  Therefore, an executor (or other trustee for that matter) must remain cognizant of the rule.

Application of WESA: Date of Death or Date of Will?

Since March 31, 2014, the Wills, Estates and Succession Act (“WESA”) has been the applicable legislation regarding wills and estates matters in British Columbia. WESA gives the courts the power to “cure” deficiencies in Wills that would formerly have been invalid for failure to comply with the required formalities under the less forgiving Wills Act (repealed by WESA).

Can the courts “cure” a deficient Will made prior to the WESA regime? The general application of WESA is that it applies if the death of the person whose Will and/estate is at issue occurred on or after March 31, 2014. As such, the courts do have the power to “cure” a deficient Will as long as the will-maker passed away after WESA came into effect.

The recent decision in British Columbia v. Sheaffer (“Sheaffer”) is an example of the Court drawing a hard line in terms of the March 31, 2014 cut-off date for the application of WESA. The dispute arose because of a second unsigned will of the deceased that differed from the original, which was properly executed. The question of which legislation was applicable is important because, under the Wills Act, the second will was insufficiently executed and therefore invalid. On the other hand, under WESA, the Courts would have the authority to accept a document despite a lack of the traditional formalities, if the Court is satisfied that the document represents the will-maker’s true intentions. In this case, the will-maker passed away in 2011 so the Court applied the Wills Act and found the second will to be invalid.

The Defendant argued, among other things, that the March 31, 2014 cut-off date is arbitrary and fundamentally unfair, and it violates his Charter rights. The argument failed and the Court found that the transitional sections of WESA and applicable date are a practical necessity. The Court does not have discretion to stray from the strict imposition of the transitional structure, specifically the March 31, 2014 cut-off.

The decision in Sheaffer forms a guideline for litigants hoping to find relief under the curative provisions of WESA. The courts are not likely to entertain arguments under WESA unless the will-maker passed away after March 31, 2014. The costs of the litigation may form another deterrent for litigants from improperly pursuing a matter under WESA. Typically, both parties’ costs in estate matters are awarded out of the estate when the litigation was brought because of the will-maker’s conduct. However, litigants that force this issue may end up paying their own costs and the costs incurred by the estate, as was the case in Sheaffer.

Thank you to Elina Hartshorne for assisting with this blog post.

Joint transfers with children can have devastating results

According to the sort of estate planning advice that gets dispensed over back yard fences and in gym locker rooms, transferring property into joint tenancy with children is the easy way to accomplish a number of things – often avoiding probate fees, and sometimes a desire to leave a particular property to a child outside of the will.

Unfortunately joint transfers are also an easy way to set up your estate for a nasty public fight that will destroy relationships over a period of months or years. The recent case of Harshenin v. Khadikin is only one example in a long line of cases that involve essentially similar facts. In short:

  1. The parent goes to a broker, investment manager or banker (for bank or investment accounts) or to a lawyer or notary (for real estate) and gives instructions for a transfer to joint tenancy with a child.
  2. The parent does not prepare a clear document stating their intention in making the transfer.

Why is the statement of intention crucial when making a joint transfer? Because the way the law has developed in this area, a transfer of property to joint tenancy is an inherently ambiguous act. In making such a transfer your intention might be one of three things: (a) to immediately gift of a part of the property, making the recipient an equal owner with you, (b) to transfer title only, leaving you as the beneficial owner and making the recipient a mere nominee for you and your estate, or (c) to pass no beneficial interest now but to allow the recipient to take the property as survivor on your death. Each of these three possibilities will lead to different consequences on your death in terms of the passing of the property and income tax considerations. Without a statement saying which one of those you intend, you leave it to your surviving family members and the courts to resolve.