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BC WILLS VARIATION ACT LAWYERS BEST PRACTICES ALERT- WVA, ALTER EGO TRUSTS AND FRAUDULENT CONVEYANCES

Lorne MacLean - Custody Lawyer

Lorne MacLean – BC Wills Lawyer

The BC Wills Variation Act disputed wills lawyers led by Lorne N. MacLean, Q.C. at MacLean Law want you to be aware of a huge new BC Wills Variation Act  and Fraudulent Conveyance Act case that has just been decided by BC’s highest court. Given this case approves of a practice which in effect  defeats Wills Variation Act claims by excluded beneficiaries- by permitting  the legitimate disposition of estate assets to beneficiaries before death- you should consult one of our lawyers by calling 1 877 602 9900, immediately:

  • for estate planning purposes to protect your wishes of how you want your assets divided;
  •  conversely, to find out what remedies may be available to you if you are the excluded beneficiary before or after your spouse dies as your failure to commence an action could defeat your rights.
  • to get legal advice with respect to the new BC Family Law Act that treats common law and marriage like relationships of over two years duration the same as if the parties are legally married for purposes of dividing property and how this case could stand as support for a finding that in these new situations the use of an alter ego trust or other method to dispose of assets in a shaky relationship is improper;
  • if you have separated or have an unhealthy married or marriage like relationship to protect yourself to find out what action you can take to avoid being disinherited

The British Columbia Court of Appeal decision of Mawdsley detailed below found nothing improper with a parent in a common law also called a “marriage like relationship”, giving away all her estate through alter ego trusts to her children leaving no value in the estate on death for her common law husband to share in.  This case is precedent setting for a number of reasons.

The British Columbia Court of Appeal, in Mawdsley v. Meshen, (2012 BCCA 91), held that the transfer of a substantial portion of Ms. Meshan’s wealth into an alter ego trust was not a fraudulent conveyance intended to defeat the claims of her common law spouse. Additionally, a spouse who does not have a claim during his or her spouse’s lifetime, and whose only claim arises on the death of the parent or spouse under the Wills Variation Act, is not a “creditor or other” with standing to challenge a transfer by their spouse under the Fraudulent Conveyance Act.

The appellant Mr. Mawdsley and the settlor Ms. Meshen were “spouses” within the meaning of the Wills Variations Act. Ms. Meshen had been married twice previously; she had three children. In 2006, Ms. Meshen was diagnosed with terminal cancer. She established an alter ego trust to take effect prior to her death; her assets at this time had a gross value of approximately $10.5 million. The children were the beneficiaries; Mr. Mawdsley was not.

At trial, the court found that during Ms. Meshen’s lifetime, Mr. Mawdsley did not have any legal claim to her assets. Because they were not married, he had no claim under the Family Relations Act, and the court found that he had not made sufficient contributions to the family business or to Ms. Meshen to be entitled to make a claim in unjust enrichment. His only claim was a Wills Variation Act claim, which only arose on Ms. Meshen’s death.

Mr. Mawdsley brought a Wills Variation Act claim. The Wills Variation Act provides that a spouse or child may apply to court to vary the will if the will-maker did not make adequate provision for the claimant. The court may then vary the will to make such provision as the court decides is “adequate, just and equitable in the circumstances.” The Wills Variation Act allows the court to vary the will, but does not give the court the power to vary a trust settled during the will-maker’s lifetime. Because the Wills Variation Act only applies to assets that fall into the estate, there was little for Mr. Mawdsley to claim unless he was successful in challenging the transfers Ms. Meshen made before her death, including the transfer of assets to the trust.

Mr. Mawdsley claimed that the transfer of Ms. Meshen’s assets to the alter ego trust was void under the Fraudulent Conveyances Act. He sought a declaration that the settlement of the trust was void as contravening the FCA; an order requiring the defendants to convey title to the real property and other investments to Ms. Meshen’s estate; and an order pursuant to the WVA making provision for his “proper maintenance and support” from the estate.

This is the first case the dealing with a challenge of a transaction under the Fraudulent Conveyance Act brought by a Wills Variation Act spuse in order to bring assets back into the estate of a deceased person so that those assets would be subject to the claimant’s Wills Variation Act claim.

The Court of Appeal held that an application under the Fraudulent Conveyance Act still requires an applicant to prove a transferor intended to “delay, hinder or defraud” creditors or others, although such intent need not be a “dishonest” intent, and may be inferred from the circumstances. The Court affirmed:
In some cases, of course, that intention may be inferred from the effect of the transaction, and indeed a presumption may arise in some circumstances from that effect. If there is no credible evidence to the contrary, the FCA may be satisfied; but there is no rule of law that in every case, an intention to defeat creditors must be inferred from the effect of the impugned transaction.

Moreover, the Court of Appeal found that a spouse who does not have a claim during his or her spouse’s lifetime, and whose only claim arises on the death of the spouse under the Wills Variation Act, is not a “creditor or other” under the FCA with standing to challenge a transfer of assets. Even if it was deemed that Ms. Meshan did “delay, hinder or defraud” in violation of the FCA by setting up the trust, Mr. Mawdsley would have no grounds under the FCA to invalidate the trust and bring the assets back to the estate.

The alter ego trust will likely be increasingly utilized by estate planners to shield their assets from Wills Variation Act claims. The settlor can use the trust to better ensure their assets are given to the beneficiaries they intended. That being said, in this case it was found that Ms. Meshen did not have any legal obligations to Mr. Mawdsley during her lifetime. It is possible that transactions may still be set aside under the Fraudulent Conveyance Act by claimants under the Wills Variation Act if those claimants can show that the transaction was intended to defeat a legal obligation that the settlor had during their lifetime i.e. a married spouse under the Family Relations Act.

If you have any questions regarding wills or estate planning, please call Maclean Family group toll free at 1 877 602 9900 to book an appointment. At Maclean family Law Group, we can answer any questions regarding Wills Variation Orders. It is crucial that you get the right legal advice to protect your assets and provide for your family. We have for offices across the province to service you located in downtown Vancouver, Surrey, Kelowna, and Fort St. John.



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