Read the transcribed version of "What Happened to My Gift: The Principle of Ademption"
During Hull on Estates Episode #62, Justin de Vries and Megan Connolly discuss the McDougald Estate c. Gooderham case decision of the Ontario Court of Appeal. They discuss what happens when attorneys for property sell assets that have been specifically gifted in a will.
What can a beneficiary do?
Hello, my name is David M. Smith and I am a partner (and now one of the resident bloggers) at Hull & Hull LLP. The focus of this week’s blogs will be on beneficiary designations. While the natural tendency is to focus on the assets of the estate, we know that the reality is that, quite often, those assets which pass outside of the estate by way of beneficiary designation will exceed the value of the estate assets.
Indeed, an increasingly common estate planning tool is to hold as many assets as possible outside of the estate, primarily as a legitimate means of avoiding estate administration tax (more commonly known as probate fees) and, in certain cases, protection from creditors.
The most common example of such assets that come to mind are Life Insurance, Registered Retirement Saving Plans ("RRSP") or Registered Retirement Income Funds ("RRIF"). Similarly, (and an issue to be considered in future blogs), assets that are jointly held (unless impressed with a trust for the estate) will pass to the surviving joint owner by right of survivorship.
The making and revoking of beneficiary designations are not always simple matters and, regrettably, litigation may ensue where there is uncertainty. Recent caselaw has raised some interesting twists on this developing area of estate litigation.
In Ontario, the provisions of Part III of the Succession Law Reform Act relating to the making of a beneficiary designation are contained in section 51 which reads as follows (within underlining added for emphasis):
s. 51(1) A participant may designate a person to receive a benefit payable under a plan on the participant’s death,
(a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction; or (b) by will, and may revoke the designation by either of these methods.
s. 51(2) A designation in a will is effective only if it relates expressly to a plan, either generally or specifically.
IS THERE SUPPORT AFTER DEATH? – What about Moral Obligations and the “Fair Share of Family Wealth” Analysis? – Part VII
As you know, we have dedicated a few recent blogs (see our June 30, 2006 and July 3, 2006 posts) to the Ontario Court of Appeal’s decision in Cummings v. Cummings.
Perhaps, most notably, in determining the quantum of support to award in this decision, the Ontario Court of Appeal endorsed the concept of dependant’s support as a re-distribution of family wealth or property.
In this regard, the Court stated (at paragraph 48):
There is another reason why the Tataryn approach fits in Ontario as well. The view of dependant’s relief legislation as a vehicle to provide not only for the needs of the dependants (thus preventing them from becoming a charge on the estate) but also to ensure the spouses and children receive a fair share of family wealth, was also important to the Court’s analysis in that case.
Just how awards for support under the Family Law Act will be affected by the Cummings v. Cummings decision remains to be seen. In resolving that problem, however, consideration of both the Tataryn and the Cummings cases must be given.
We hope you enjoyed our review of this important turning point in the area of dependant’s relief, and we intend to continue to follow the issue and discuss further developments in future blogs.
All the best, Suzana and Ian. ——–
In Cummings v. Cummings, the Court of Appeal affirmed the decision made by the application judge at first instance.
In coming to this conclusion, the Court of Appeal was strongly influenced by the concepts set out in the decision of the Supreme Court of Canada in Tataryn v. Tataryn Estate ( 2 S.C.R. 807 (S.C.C.)).
The decision in the Tataryn case held that moral considerations were applicable to a determination as to the amount of a dependant’s support award in the context of the British Columbia statute (The Wills Variation Act, R.S.B.C. 1979, c. 435).
Until the Cummings v. Cummings decision, the approach to quantifying dependant’s relief claims in Ontario was to essentially ignore the Tataryn moral considerations approach. This was as a result of the fact that the Tataryn decision was an appeal from the British Columbia Court of Appeal and was in respect to section 2(1) of the Wills Variation Act, which included substantially different wording than that of the SLRA. The Wills Variation Act assists dependants where there is a will which does not "in the Court’s opinion, make adequate provision for the proper maintenance and support of the testator’s wife, husband or children".
It is this language that has allowed the British Columbia Courts to approach the whole question of quantifying dependant’s relief on a very different basis and on a moral conviction approach. The language in the Wills Variation Act is broadly drafted and essentially allows the Court to do what it thinks is adequate, just and equitable in the circumstances.
With the Cummings v. Cummings decision essentially embracing the decision of Tataryn, a very different approach must be considered in respect of quantifying dependant’s relief claims in Ontario.
We hope this case gives you an idea of the application of the basics legal definitions and terms.
All the best, Suzana and Ian. ——–