It is a rare situation when someone dies without any creditors. However, if someone plans their estate in such a way as to defeat creditors, when does that amount to a fraudulent conveyance? This was the issue before the British Columbia Supreme Court in Kramer v Kramer 2023 BCSC 116.

Karen and Leanne were the only daughters, executors, and sole beneficiaries of the estate of their mother Clara Kramer. Leanne was the attorney for property for Clara. Two years before Clara’s death, Leanne, unbeknownst to Karen, created the Kramer Alter Ego Trust, which mirrored the terms of Clara’s Last Will and Codicil. Leanne (as attorney for property) then transferred the majority of Clara’s assets into the trust.

Karen commenced an action seeking a variation of Clara’s Will and Codicil and for an order under s. 1 of B.C.’s Fraudulent Conveyance Act (“FCA”), that the disposition of property to the Trust was void and of no effect against Karen and that the property was part of Clara’s estate. Karen claimed that she had standing as a creditor because of a loan of $164,000.00 she gave her mother in 1998.

The Court held that Karen was no longer a creditor and had no standing under the FCA. This determination was reached because of evidence that showed that the loan in question has been paid off by Clara in 2012 and, at the time the trust was created, Karen had no additional evidence that she was owed money.

Even if she was a creditor, it is a nice question whether the estate plan could be construed as a calculated means of defeating her entitlement. Notwithstanding Karen’s failure on the threshold issue, the Court heard evidence from professional advisors that spoke to the rationale for avoiding probate fees. The Court observed that the estate plan mirrored the terms of the Will including inconvenient facts (for Karen): payment of a specific cash bequest of $299,000 to Karen and the payment of over $13,000,000 (!) in liabilities to CRA and other creditors.

Simply put (and even though it was a moot point because the Court concluded she was not a creditor) it would have been a stretch to find that this estate plan was a calculated attempt to defeat Karen as a single creditor.

Thanks for reading,

David Morgan Smith and John Mikhail