Drafting to Prevent Attacks by Disappointed Beneficiaries

November 25, 2016 David Freedman Estate Planning, Litigation, Wills 0 Comments

This is my last blog of the week in respect of drafting Wills where litigation after the death of the Testator is a real possibility.

Lawyers that deal with estate planning and estate litigation know well how family dynamics can make simple problems more complicated to resolve. Consider the commonly occurring situation featuring an estranged child who might be expected to contest a parent’s Will hoping to take a share of the Estate on an intestacy. While the Testator may wish to voice his or her disapproval of the estranged child receiving anything, it is no kindness to the beneficiaries of the Estate to leave them with the problem of dealing with the estranged child. One can’t prevent litigation but one might anticipate it and try to put in place circumstances on the ground to deter it. Hence the time-honoured strategy of using a modest gift coupled with provision that constrains the estranged child’s conduct on threat of losing a gift.

There are two parts to the effective use of this strategy. First, the Testator will be reluctant to leave any sort of gift but one can explain that some modest amount of money should be ear-marked as a sort of war chest. One can reasonably estimate the cost of advice to the Estate Trustee and responding to the initial salvos from the estranged child through correspondence. This is the amount of the gift.

Second, one can use a prohibitory clause that would negate the gift on a Will challenge – just ensure the provision isn’t held as void. It is almost trite law that a clause in terrorem may be void where the gift includes personal property, is a restraint which forbids the legatee disputing the will, and is “idle” (that is, results in a forfeiture without a gift-over to someone else); see, for example, Budai v. Milton, 2014 ONSC 5530 (Ont. S.C.J.). That said, the doctrine is easy to avoid by ensuring that there is a gift-over if the prohibition is engaged.

The reason that I feel that this strategy continues to have merit is that the beneficiaries of the Estate will naturally be frustrated and annoyed at the prospect of dealing with the estranged child. This then sets the stage for the litigation to become a point of principle which leads to higher litigation costs and unnecessary expense. When the beneficiaries see that some modest gift is being offered and essentially forfeited by the child challenging the Will, they will not immediately see a threat to their own interests in the Estate and be somewhat mollified by the challenger simply losing the gift. Beyond, the challenger may simply take what’s on offer and leave unsatisfied – but still leave.

Have a nice weekend everyone and enjoy the Grey Cup!

David

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