The BC estate litigation lawyers lawyers at MacLean Estate Litigation know estate claims are often emotionally charged and filled with recriminations. Estate claims can occur when assets have been gratuitously placed in the name of the deceased’s child or third party. Whether this was done for convenience, with the asset to be shared with other family members or to be legitimately retained absolutely by the person on title is often hotly disputed. Further, claims by excluded beneficiaries that they were not properly provided for in the Will can be made under the BC Wills Variation Act. Finally, in cases where a testator takes steps to prevent a Wills Variation Act claim, by structuring their affairs to leave nothing in the estate for the disgruntled excluded person to make a Wills Variation Act claim can lead to claims of Fraudulent Conveyance. Call us at 1-877-602-900 if you have an estate litigation issue as strict deadlines apply.
A recent decision of Judge Halfyard in Holvenstot dealt with issues of resulting trust or gift together with a Wills Variation Act claim by a son of the deceased who had excluded him from the will for what she said was outrageous conduct by him towards her. The steps involved in these cases involve trying to get assets outside of the estate back into the estate followed by a claim against the estate which has more assets in it. The tests for a gift or trust resulting in the estate being enlarged are complex and we take the time to quote the able reasoning of the judge on this point below:
The Claims
[6] The plaintiff first claims that Susan Holvenstot (“the defendant”) received real and personal property from their mother during the mother’s lifetime and that these assets were held by the defendant in a resulting trust for the mother’s estate. The plaintiff seeks an order to compel the defendant to pay the value of those assets to their mother’s estate. The second claim of the plaintiff is for an adequate, just and equitable share of the mother’s estate, pursuant to s. 2 of the Wills Variation Act.The Defence
[7] The defence to the first claim is that the mother gifted a one-half interest in the Courtenay property to the defendant at the time she purchased it in November 1996, and that she transferred her remaining assets to the defendant (bank accounts and other investments) under the terms of a secret trust. The terms of the trust required the defendant to divide the mother’s half-interest in the Courtenay property (which would devolve to the defendant by right of survivorship) and all of the mother’s other assets which remained in existence at the time of her death, equally between the defendant and her two sisters, subject to equalizing gifts of money that had been made to the defendant’s sisters during the mother’s lifetime. It is alleged that the terms of the secret trust are reflected in the “equalization” directions given in the mother’s will dated June 19, 1997.
[8] The defence to the second claim is that the mother had reasons for excluding the plaintiff from her estate that were true and rationally connected to the disinheritance; and that as a consequence, the court should not set her decision aside.
11] The plaintiff alleges that all of the property received by the defendant from her mother was received subject to a resulting trust in favour of her mother or her mother’s estate. The defendant admits that she received the assets in question from her mother, without paying anything for them. In these circumstances, the law presumes the creation of a resulting trust, and places the burden of proof on the defendant to rebut that presumption. In order to do that, the defendant must prove on the balance of probabilities that her mother gifted to her a one-half interest in the residential property she purchased in Courtenay, and that the mother transferred her other assets (and the right to receive her mother’s half-interest in the residential property on her death) to the defendant, subject to the terms of a secret trust.
67] In order to rebut the presumption of resulting trust which is created by the gratuitous transfer of property, the transferee must prove on the balance of probabilities that the transferor intended to make a gift of the property. Where a “secret trust” is alleged, the person to whom the property is delivered must establish that the owner of the property intended that the recipient would hold the property subject to specific trust conditions that are accepted by the recipient.
[68] It is no longer a requirement that the evidence presented to prove the transferor’s actual intention must be evidence that existed contemporaneously with the transaction in question. But evidence of intention that came into existence after the transaction, in order to be admissible, must be relevant to the intention of the transferor at the time of the transfer. The reliability of such post-transaction evidence must be carefully assessed by the court, because this type of evidence is often self serving and may attempt to show a subsequent change in the transferor’s intention. There is often little or no reliable confirmatory evidence.
[69] I have taken this summary of the law from Pecore v. Pecore, [2007] 1 S.C.R. 795, Fuller v. Harper, 2010 BCCA 421 and Rascal Trucking Ltd. v. Nishi, 2011 BCCA 348.
The court did not accept there was any gift or secret trust on the dense facts of ther case.
The effect of this would normally be to have the value of these assets which were not in the estate returned to the estate increasing its value for purposes of the son’s Wills Variation Act claim.
What is the test for a successful Wills Variation Act Claim?
The Law
[88] This claim is advanced pursuant to s. 2 of the Wills Variation Act. The relevant part of that statute reads as follows:
2. . . . if a testator dies leaving a will that does not, in the court’s opinion, make adequate provision for the proper maintenance and support of the testator’s . . . children, the court may, in its discretion, . . . order that the provision that it thinks adequate, just and equitable in the circumstances be made out of the testator’s estate for the . . . children.
[89] Section 5 of the Act states the rules governing the admissibility and weight of evidence relating to a testator’s reasons for making or not making dispositions in his or her will. That section states:
1) In an action under section 2 the court may accept the evidence it considers proper of the testator’s reasons, so far as ascertainable,
a) for making the dispositions made in the will, or
b) for not making adequate provision for the spouse or children,
including any written statement signed by the testator.
2) In estimating the weight to be given to a statement referred to in subsection (1), the court must have regard to all the circumstances from which an inference may reasonably be drawn about the accuracy or otherwise of the statement.
[90] The general principles which apply in an action of this kind were set out by the Supreme Court of Canada in Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807. It was established that a testator may owe a legal obligation or a moral obligation to his or her independent adult child. A legal obligation will generally not arise unless the child contributed to the estate in some way. In the present case, it is conceded that the mother had no legal obligation to the plaintiff to make provision for him in her will.
[91] In Tataryn v. Tataryn Estate at paragraph 31, in discussing a testator’s moral obligation, Madam Justice McLachlin stated in part, as follows:
[31] . . . if the size of the estate permits and in the absence of circumstances which negate the existence of such an obligation [i.e., a moral obligation], some provision for such children should be made . . . .
[92] The circumstances which can negate the existence of a moral obligation include the reasons relied on by a testator, where those reasons are valid and rational. In Kelly v. Baker, the Court of Appeal defined the test for assessing reasons given by a testator in this way (at paragraph 58):
[58] The law does not require that the reason expressed by the testator in her will, or elsewhere, for disinheriting the appellant be justifiable. It is sufficient if there are valid and rational reasons at the time of her death – valid in the sense of being based on fact; rational in the sense that there is a logical connection between the reasons and the act of disinheritance.
The court reviewed all the complaints the deceased mother had about her son including, stealing from her, planting marijuana on her property leading to her conviction for drug possession, trying to get control over her estate alleginbg lack of capacity, tried to get her two acres of land, taking her personal possessions etc. Many of these claims were found by the court to be invalid but several were upheld by the court as legitimate reasons to exclude the son from any part of the estate. Further, the mother has been interviewed on videotape by a judge who recorded her complaints.
In short the court found some complaints true and secondly and just as importantly that they were valid reasons not ridiculous ones for excluding the son from her estate. The court relied on the mother having to defend the claim she was incompetent and to sue her son to ensure he didn’t get 2 acres of her land as well as for growing marijuana on her land leading to her criminal conviction.
The legal test for the upholding by the court of the reasoning of the testator to exclude a beneficiary was reviewed as follows:
[130] The next question is whether the true and logically-connected reasons of a testator must be subjected to the further objective test of whether the disinheritance does or does not meet the standard of what a judicious parent, aware of contemporary community standards, would do in the same circumstances. Both counsel have cited authorities that bear upon this issue.
[131] In Schipper v. De Lange, 2010 BCSC 1067, Mr. Justice Verhoeven decided that the objective sufficiency of a testator’s reasons was “part of the question of whether the reasons of the testator are rational” (paragraph 18). In doing so, he relied on the reasoning of Madam Justice Ballance in McBride v. Voth, 2010 BCSC 443, at paragraphs 135 – 142. Ballance J. had identified this troubling issue and noted a trend in the authorities, in her comprehensive review of the law. But the issue did not arise in the case she was deciding.
[132] In LeVierge v. Whieldon, 2010 BCSC 1462, Mr. Justice Sewell held (at paragraphs 60 – 61) as follows:
[60] I take the reference [in Kelly v. Baker] to there being no requirement that the reasons be justifiable to mean that the court need not agree that the reason was a good or a sufficient reason for disinheritance. Rather the court should confine itself to determining whether the decision was based on true facts and whether there was a logical and rational connection between those facts and the consequence of disinheritance.
[61] The above formulation of the task facing the court must be understood in the context of the fundamental duty of the court to satisfy itself that the actions of the testator are consistent with society’s reasonable expectations of what a judicious parent would do in the circumstances by reference to contemporary community standards. Thus, I consider that it is appropriate to intervene, even if the testator acted on true facts and there is a logical connection between the decision to disinherit and those facts, if the result of such disinheritance would be inconsistent with an objective standard of what a judicious parent would do in these circumstances. . .
[135] The cases of McBride v. Voth, Schipper v. De Lange and LeVierge v. Whieldon were all decided before the decision of the Court of Appeal in Hall v. Hall, 2011 BCCA 354. At paragraph 43, speaking for the court, Madam Justice Neilson stated in part as follows:
[43] . . . To succeed in his challenge to her will, Tony must establish these reasons were false or unwarranted: Bell v. Roy Estate . . . . In considering that proposition, it is not necessary to find the reasons were justifiable. It is enough if they were factually valid, and rational in the sense of having a logical connection to the act of disinheritance: Kelly v. Baker . . . .”
The end result was a dismissal of the sons claims under the Wills Variation Act based on the respect for the testator’s legitimate wishes.
Although the son succeeded in proving the Defendant had property that should go back into the estate based on resulting trust the evidence was that these monies had already been divided by agreement with the remaining siblings and so no order was needed from the court.
