Tag: Civil Law

10 Feb

What’s in a Name?

Suzana Popovic-Montag Estate & Trust, Estate Planning, Support After Death, Wills Tags: , , , , 0 Comments

In most common law jurisdictions, the devolution of an estate begins with the principle of testamentary freedom. That is, that a testator is free to dispose of his or her property in any way he or she sees fit. However, in practice, this is rarely the case. Testamentary freedom has many restrictions that significantly curtail a testator’s ability to freely dispose of his or her assets.

For instance, family law legislation provides certain rights to a surviving spouse which allow for an election to be made to receive an equalization of net family property rather than taking an  interest under the estate. Dependant’s relief legislation also steps in to provide relief to dependants who were not adequately provided for by the deceased’s estate. Furthermore, there are contractual arrangements, such as cohabitation agreements, as well as equitable claims in unjust enrichment, constructive trust, and quantum meruit, that may be available to further restrict the testator’s dispositions made in a will or under the laws of intestacy.

In contrast, in many civil law jurisdictions, there exists what appears to be a more rigid system of forced heirship. Forced heirship essentially starts with the premise that there are certain individuals to whom a testator has a moral and legal obligation to support after death, notably their descendants and spouse. Accordingly, it limits the ability to disinherit these protected heirs by setting out that a specific percentage of an estate’s value is to be reserved for their benefit. This amount can vary widely depending on the number of descendants as well as other variables such as whether any of them are disabled.

Provided that the will respects these percentages by making dispositions that provide at least the minimum required, there will be no issue of a claim against the estate. However, in circumstances where the testator has not met the minimum requirement, the protected heirs have the ability to make a claim against the estate enforcing their rights to the reserved portion.

It is important to note that a protected heir enforcing his or her forced heirship rights is not automatically an heir. He or she simply has a pecuniary claim against the estate which can be satisfied by the estate’s assets. In the event that the estate does not have sufficient assets, the protected heir can seek to enforce various clawback provisions. These vary by jurisdiction but may include inter vivos gifts made within a period of time prior to death or with the intention of subverting forced heirship rules, as well as the creation of any trusts for similar purposes.

There are similarities between forced heirship regimes and our own dependant’s relief legislation. For instance, section 72 of the Succession Law Reform Act (“SLRA”) provides for a similar clawback provision in order to ascertain the value of an estate in making an award for support. Forced heirship claims are also subject to strict limitation periods much like dependant’s relief and equalization claims. Moreover, forced heirship is not an automatic transfer of wealth upon death simply by virtue of being a descendant of the deceased. In many jurisdictions, the protected heirs have the ability to renounce these rights prior to death or may choose not to make a claim after death at all.

The main distinction is that in a dependant’s relief context, the claimant has the additional burden of proving that the testator owed them support, whereas under forced heirship, simply being a descendant can be sufficient. However, the common law courts have construed the test of whether a dependant was owed support under the SLRA quite broadly. Moreover, the definition of a dependant under the SLRA encompasses many more potential claimants then most definitions of a protective heir will permit.

Despite the fact that forced heirship starts from the opposite end of the spectrum of testamentary freedom, it reaches a similar end result. Where forced heirship applies a more rigid starting point and then gradually loosens its grip, testamentary freedom begins with an open ended proposition that is subsequently restricted. Regardless of the approach taken, both systems seek to address a shared concern of public order: the duty to provide for your dependants after death.

Thank you for reading.

Suzana Popovic-Montag

12 Aug

Square Pegs and Round Holes: The Civil Law Trust

Suzana Popovic-Montag Estate & Trust Tags: , , 0 Comments

The root of the personal trust is so firmly embedded in the common law and equity that it is sometimes easy to forget that many civilian jurisdictions have come to adopt variations of it into their civil codes.

The civil law trust has struggled to survive from the start. This is because the most fundamental civilian notion of ownership is based on the unification of the usus (right to use), fructus (right to receive the fruits), and abusus (the right to alienate). The trust seeks to divide these rights. While the civil law does provide for dismemberments to the right of ownership, including substitutions and usufructs, these models allow for successive ownership or a form of split title. The three rights are all still present. Using the common law trust, the civil law finds it difficult to determine who is the legal owner. This struggle lies with a third party trustee acting as both legal owner and administrator. These roles are seen as inherently incompatible.

Despite these differences, the civil law trust has persevered. In Quebec, the new Civil Code sought to move away from the landmark decision in Royal Trust Co. v Tucker, [1982] 1 S.C.R. 250. This decision held that ownership of trust property was a sui generis property right and that it was temporarily vested with the trustee for the duration of the trust. The new provisions of the Code effectively ended this by introducing a new model for the trust that was based on the common law but which finally reconciled the ownership debate. This was done by redefining the civilian trust as a distinct patrimony that had been appropriated to a purpose.

The idea of a patrimony is not a new one in civilian jurisdictions. In Quebec, every individual has their own patrimony that is composed of an entirety of all their pecuniary rights and obligations. The trust patrimony is simply a distinct patrimony that is not attached to any one person or corporation. It is comprised of all trust property, it is administered by a third party trustee, and is appropriated for the purpose of providing benefits to the beneficiaries. Therefore, unlike the common law model, there is no owner of the trust. The trustee administers it by virtue of his role as an administrator of the property of others.

These changes have allowed the civil law trust in Quebec to flourish and be put to greater use, most notably for commercial purposes. The changes have also led to a form of remedial trusts being implemented by the courts. Unlike the common law model, only express trusts are valid. Constructive and resulting trusts have not yet been recognized. However, there is now a provision that allows the court to constitute a trust in order to secure certain family support obligations including spousal and child support.

These and other developments are a reminder of the inherent flexibility of the trust as a legal tool. It has the ability to continue to evolve and be adapted as a solution to a wide array of issues. While some civil law jurisdictions, such as Quebec, may have started out by trying to fit the proverbial square peg into a round hole, the legislators have responded innovatively which has led to the successful evolution of the civil law trust.

Thank you for reading.

Suzana Popovic-Montag

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