The right for a beneficiary to disclaim their interest under an estate is well-established in Ontario, traceable back to the original English courts of chancery – the fundamental principle at play being that a named beneficiary of an estate interest cannot be forced to accept a testamentary gift.
As put plainly by Chief Justice Abbott in Townson v Tickell (1819), 3 B. & Ald. 31 (Exch.) at pages 360-37:
“The law certainly is not so absurd as to force a man to take an estate against his will. Prima facie a gift, whether given by Will or otherwise, is supposed to be beneficial to the party to whom it is so given. Of that, however, he is the best judge and if it turns out that the party to whom the gift is made does not consider it to be beneficial, the law will certainly, be some mode or other, allow him to renounce or refuse the gift[…]”
That disclaimer is available to beneficiaries in Ontario is uncontroversial. For further reading, please see the informative article published in The Probater by our colleague Jonathon Kappy.
Typically, where a beneficiary is exercising their right to disclaim, they are doing so with respect to a testamentary gift in a Will. A disclaimer in this scenario has the effect of the gift passing by the named beneficiary entirely. How the gift is to be treated will then depend on the language in a particular Will – if the Will contains language concerning a ‘gift-over’, or language specifically referencing disclaimer, then that language will dictate how the gift is to be treated in the event of a beneficiary’s disclaimer.
The act of disclaimer has the effect of varying how an estate will be distributed, in a manner different from what the testator had contemplated. However, what happens when the interest flows not from an estate, but from a trust?
In Ontario, the Variation of Trusts Act, R.S.O. 1990, c. V.1 sets out the rules for how a trust may be modified, as is explained in a recent article by our Managing Partner, Suzana Popovic-Montag.
The question that has been brought before Courts of other Canadian jurisdictions is whether the existence of variation of trusts legislation like Ontario’s Variation of Trusts Act supersedes the common law right to disclaimer. The British Columbia Court of Appeal has provided a guiding precedent on this question in its 1998 decision of McGavin v. National Trust Co., which held that variation of trusts legislation will only supersede the common law ability to vary a trust where the legislation expressly negates that right.
The Variation of Trusts Act does not prohibit varying a trust interest by way of disclaimer. Accordingly, the right to disclaim remains available to Ontario beneficiaries.
Thanks for reading!