Does a Person with a Medical Condition Affecting His Mind Have the Mental Capacity to Make a Will?

One of the grounds for challenging the validity of a Will is that the person who made the Will did not have the mental capacity to understand his actions.  With an aging population and higher rates of medical conditions, such as Dementia and Alzheimer’s Disease, which may affect a person’s memory and other mental functions, questions about testamentary capacity arise more frequently.

In a recent case Bull Estate v. Bull, the Supreme Court of BC provided further guidance on the issue of testamentary capacity. In Bull Estate, the deceased made a Will in 2010 leaving more assets to her daughter than her son. The deceased died in September 2012. Her son challenged the Will on the basis that, amongst other things, the deceased’s progressive dementia made her incapable of making the Will.

The Court found that the deceased had the requisite testamentary capacity when she executed the Will in 2010, and the Court further stated that sufficient mental capacity to make a Will may exist despite the presence of cognitive deterioration, and a will-maker may have sufficient mental capacity even if his/her ability to manage other aspects of his/her affairs is impaired.

In reaching its conclusion, the Court summarized the following non-exhaustive principles that have been established by courts over the years:

  • the test for testamentary capacity is not overly onerous;
  • simply having an imperfect or impaired memory does not in of itself absent testamentary capacity unless it is so great as to leave no disposing memory;
  • the will-maker needs to have an appreciation of the claims of the persons who are natural objects of his/her estate and the extent of his/her property of which he/she is disposing;
  • because testamentary capacity is a legal question and not a medical question, a medical opinion, although valuable and relevant, is not determinative of testamentary capacity;
  • a will-maker cannot be found not to have testamentary capacity simply because he/she chose to leave his/her estate in a manner that some might think unkind.

While each case of testamentary capacity turns on its own unique facts and evidence presented, the Bull Estate decision sets a high bar for a person challenging a Will to establish that the will-maker did not have the requisite mental capacity to make the Will, even if the will-maker suffered from medical conditions affecting his or her mental functions when the Will was made.

Court Removes “Ill-Mannered” Administrator, Sanctions Him With Special Costs

While BC Courts have the power to remove executors and administrators, it is rarely exercised.  Our Courts have held that “not every act of misconduct should result in removal”.  You may wonder, then, what misconduct would result in removal of an executor or administrator?  The BC Supreme Court answered this question last Friday, in the Estate of Forbes McTavish Campbell.

Mr. Campbell died intestate in 2011.  As he was divorced at the time, his three children were appointed as co-administrators in April 2012.  The estate in BC was modest, and appeared to have been reduced in size by Mr. Campbell’s caregiver.  Apparently, the caregiver absconded with $175,000 in cash, the deceased’s car, proceeds of a mortgage against real property (allegedly obtained through forgery), and certain other assets.  The administrators reported the losses to the police, and investigations were made but had not resulted in an arrest at the time of the application.

The administration of the estate had come to a halt.  Two of the administrators wished to move forward with administration, but the third refused to do so.  The two administrators’ lawyer made a detailed and reasonable written plan to move forward with the administration of the estate.  The third administrator’s response email advised that he would communicate with the lawyer, but at a cost of $300 per email, $500 per telephone call, and $1,500 per letter.  As you may imagine, this offer was not accepted by the two administrators (and  was not well received by the Court either).

Ultimately, the two administrators brought an application to have the third removed.  The Court found that the third administrator’s behaviour was so unreasonable and uncooperative that he must be removed.  Some (but by no means all) examples of the improper behaviour included:

  • advising the Court at the hearing that he was holding an envelope containing evidence he had uncovered demonstrating that the two administrators had colluded with the caregiver in defrauding the deceased, but refusing to allow the two administrators to know the contents of the envelope;
  • insisting that he need not communicate with his co-administrators until they each first paid him almost $40,000;
  • showing himself to be “unable to communicate in a mature and civil fashion”.  Rather, his emails were “condescending and thoroughly disrespectful in tone and content”  and “relentlessly juvenile, profane and intemperate”.

The Court noted that the test on a removal application was the welfare of the beneficiaries of the estate.  The Court then referenced section 158 of the new Wills, Estates and Succession Act, which permits a Court to remove an administrator.  The specific grounds for removal referenced in this case were in s. 158(3)(f):

  • unable to make the decisions necessary to discharge the office of personal representative;
  • not responsive; or
  • otherwise unwilling or unable to or unreasonably [refusing] to carry out the duties of a personal representative.

The Court found that the third administrator’s behaviour met these grounds, and ordered that the third administrator be removed.

The Court found the third administrator’s “reprehensible behaviour” was so egregious as to be deserving of an order that he personally pay the costs of the co-administrators on a special costs basis.  The Court did so not only as a form of “punishment of a wayward party”, but also to “serve as a warning to others entrusted with the important duties of administering estates: trustees who engage in this sort of nonsense will pay a high price.”

I understand that the third administrator has indicated he will be appealing this order.  If so, stay tuned for the next chapter…

 

8 Things You Should Know About TFSA and RRSP Designations

With the 2015 Federal Budget significantly (and immediately) increasing the amount that Canadians can contribute to their Tax-Free Savings Accounts (TFSAs), it’s a good time to review your beneficiary designations on your TFSAs, RRSPs and other registered accounts as part of your overall estate planning. Here are eight crucial things to consider about your designations:

  1. There’s more than one way to make a designation. You can designate beneficiaries by filling out the form that your financial institution or account trustee has prepared for that purpose. You can also make a designation in your will or in a separate document and notify the financial institution after the fact. All of these methods are equally effective under BC law.
  2. Assets passing to designated beneficiaries don’t go through probate. On death, your registered accounts pass to your designated beneficiaries directly, outside of your estate. The distribution of those assets is not held up waiting for a grant of probate of your will to be issued, and the assets are not subject to BC probate fees of 1.4%.
  3. A designation protects your assets. Assets passing to designated beneficiaries are not subject to claims of creditors of your estate. They are also safe from any risk of a wills variation claim by a disappointed spouse or child.
  4. You can designate more than one beneficiary. You can designate several beneficiaries, and specify the share that each one takes. If you don’t specify the proportions, the beneficiaries will take equal shares.
  5. You can designate alternate beneficiaries. It’s possible, and common, to designate alternate beneficiaries. For example, you can designate your spouse, but state that if your spouse does not survive you then your children or your chosen charities are the beneficiaries.
  6. You can designate a trustee. If you are designating children under 19 as beneficiaries, at a minimum you should name a trustee to receive and hold their share for them until they turn 19. It’s possible to set up longer term and more tailored trust terms for any beneficiary in a will or trust document drafted by a estates and trusts lawyer.
  7. Make your spouse a “successor holder” of your TFSA. If you designate your spouse as beneficiary of your TFSA, then on your death the TFSA is collapsed and paid out to them, making future income on those investments taxable. But if you name your spouse as “successor holder” of your TFSA, then on your death they inherit your TFSA contribution room, allowing them to effectively add your tax-free investments to theirs. Using the right wording could make an enormous difference to your spouse’s tax liability after your death.
  8. Consider the taxes on your RRSP. When you die, the value of your RRSP investments are taxed as ordinary income unless you leave them to your spouse. When you die with a non-spouse beneficiary named, the related taxes are paid from your estate assets and not by the beneficiary, unless your estate is insolvent. Your estate planning should plan for this liability.