A recent decision of the Supreme Court of British Columbia examined the tension between a testator’s moral obligation, if any, to provide for a child under a will, and that testator’s freedom to dispose of his or her estate as that testator sees fit.
The facts in Grewal v Litt are relatively simple and were generally not in dispute between the parties. The applicants were the four daughters of the two testators whose wills were under scrutiny. The respondents were the testators’ two sons. The testators had died leaving mirror wills, each benefitting one another. Upon the death of the survivor, the wills left modest bequests of cash to each of the daughters, while the two brothers shared the residue.
The combined values of the estates exceeded $9 million. Pursuant to the terms of the wills, each daughter was to receive a bequest of $150,000, or about 1.5% of the total value of the two estates. The two brothers were the sole residuary beneficiaries and stood to split the remaining 94%.
The daughters brought an application to vary the wills under section 60 of British Columbia’s Wills, Estates and Succession Act (the “WESA”) to provide an equal distribution of the residue between all six children. The application was brought on the basis that the testators had purportedly discriminated against the applicant daughters based on their adherence to traditional cultural values. The respondent brothers agreed that the terms of the wills did not fulfill the testators’ moral obligations to the daughters, but did not agree that the solution was an equal distribution of the residue.
The court grappled with the tension between the need to make proper provision for the daughters versus recognizing the testators’ broad testamentary freedom to dispose of their estate as they see fit. Ultimately, the court found substantially in favour of the daughters and held that each daughter would be entitled to a 15% share in the residue, with the respondent brothers each receiving a 20% share.
In reaching that decision, the court first looked at section 60 of the WESA and noted that the value of the estates was large enough that the court could both consider the parents’ testamentary autonomy in favouring the respondent brothers while nonetheless making adequate provision for the applicant daughters.
The application judge then referred to numerous prior decisions in which the court had ordered variations of wills when unequal testamentary distributions were made by testators who believed themselves to be bound by cultural norms. Finally, the judge noted that the significant contributions by the daughters to the testators during the last few years of their lives, which were not replicated by the brothers, enhanced the testators’ moral obligation to provide for the daughters.
This case’s potential impact in Ontario remains to be seen, although it is important to the note that Ontario lacks a statute with as broad a mandate for varying testamentary documents as the WESA. Part V Ontario’s Succession Law Reform Act is a comparable parallel that allows a court to make adequate provision for a testator’s dependants, but that language is less broad than the language of the WESA. In any event, the Court of Appeal for Ontario held in Spence v BMO Trust Company that absent any requirement by a testator to adequately provide for a dependant, the testator has broad testamentary freedom.
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An in terrorem condition attached to a testamentary gift keeps a beneficiary “in fear” of losing entitlement to the gift, if they partake in certain actions that are noted by the testator.
We have previously blogged about the use of in terrorem conditions, and specifically when the conditions will be upheld, or struck down. Kent v McKay (1982 Carswell BC 187) is authority for the test of striking down an in terrorem condition.
There are two general types of in terrorem conditions.
The first type of condition, and the most common, forbids the beneficiary from contesting the validity of the will. We have previously blogged on this type of in terrorem condition.
The second condition is partial restraint on marriage, which is usually a condition that requires the beneficiary to obtain consent to marry. This condition may only apply if it is clear from the outset that the condition in the will is not a total restraint on marriage. Total restraints on marriage will be void from the outset. A partial restraint on marriage may act to limit a person from marrying a particular individual, or members of a particular class. It is likely, however, that any restraint on marriage will be found void for public policy reasons. The recent Court of Appeal decision in Spence v BMO Trust Company, 2015 ONSC 615, is relevant to the issue of restraint on marriage and public policy. A previous blog on this case can be found here.
Pursuant to the decision of Re Dickson’s Trust (1850) 61 ER 909, in order to validate an in terrorem condition, the testator must show that the condition would be given effect if the testator demonstrated their intention by way of a gift over.
As explained in The Law Relating to Wills: “a condition in restraint o[n] marriage or a condition not to dispute a will, may be annexed to a testamentary gift, but where the subject of gift is personalty, such a condition… must, as a general rule, be accompanied by a gift over, otherwise the condition will be treated as merely in terrorem and therefore, void.” The case of Ketchum v Walton, 2012 BCSC 175, suggests that in terrorem conditions in general have been held to be void, if not accompanied by a gift over.
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How far can one’s discriminatory beliefs endure in regard to estate planning?
We previously blogged about the Ontario case of Spence v BMO Trust Company (2016 ONCA 196 [CanLii]), where a daughter was disinherited by her father due to her relationship with a white person, what she argued was a “racist principle”. The will had a condition that disqualified Spence from the inheritance because of her relationship. The will was ultimately upheld, and she was disinherited, with her leave to appeal denied by the Supreme Court of Canada. Following this case, it remains unclear whether the court is willing to uphold discriminatory wills or bequests as a whole.
A recent case in New York follows in Spence’s footsteps. A New Jersey woman’s leave to appeal was denied after she argued she was disinherited by her father for falling in love with a Jewish man. She states the will, created in 1987, contained defamatory statements about her behaviour that were put in the will in order to justify her disinheritance.
A Canadian case that ruled the opposite way and managed to strike down a bequest was McCorkill v Streed (2013 NBQB 249 [Canlii]). In this case, a testator left the remainder of his estate (around one million dollars) to a Neo-Nazi organization. This inheritance was declared void for being contrary to public policy.
While the law in Canada has ruled two different ways, there ought to be consistency and change in acknowledging discriminatory bequests. As I previously stated in an article for the Law Times in June, the Spence decision, and now the added New York decision is troubling. The courts should have guidance when these sorts of discriminatory issues arise based on the facts of the case. Discriminatory wills or bequests should be seen as contrary to public policy and therefore disallowed. It should be the job of the legislature, and not the courts, to create a statutory mechanism that will provide a safeguard for heirs who are disinherited from estates that they otherwise would be entitled to. This issue becomes a balancing act between public policy and testamentary freedom. In drafting wills for those who may want to add a discriminatory condition, there is currently no determinative precedent as to what the courts will uphold due to the somewhat conflicting results from Spence and McCorkill.
Legislation ought to be developed to promote equality in estate planning to ensure that potentially discriminatory gifts will not be upheld in a court. While there is no clear legal stance, practicing lawyers who draft wills should now inform their clients of the potential that certain gifts may be barred due to being against public policy.
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This week on Hull and Estates, Rick Bickhram and David Smith discuss how changes in the definition of marriage have impacted Estate Law and Estate Administration.