Tag: Quinn Estate

25 Mar

Pour Over Clauses – Incorporation by Reference

Stuart Clark Estate Planning Tags: , , , , , , , , , , 0 Comments

I have blogged this week about the general availability of “pour over clauses” and whether you can leave a bequest in a Will to an already existing inter vivos trust. In my blog yesterday I discussed “facts of independent significance” as one of the potential arguments that has been raised to attempt to uphold “pour over clauses”, and how the concept was rejected by the British Columbia Court of Appeal in Quinn Estate v. Rydland, 2019 BCCA 91. In today’s blog I will discuss another argument that was raised in Quinn Estate to try to uphold pour over clauses; the doctrine of “incorporation by reference”.

The doctrine of incorporation by reference at its most basic allows a Will to refer to a separate document which provides for dispositive provisions, with such a separate document being “incorporated” into the Will to be carried out by the executor as part of the administration of the Will. The most common example of incorporation by reference would be a memorandum directing who is to receive various personal items from the testator, with the Will directing the executor to distribute the personal items in accordance with the terms of the separate memorandum.

The general test for whether a document can be incorporated by reference into a Will is:

  1. It must be clear that the testator in the Will referred to some document then in existence; and
  2. the document in question must be beyond doubt the document referred to.

When incorporation by reference is raised as part of an attempt to uphold a pour over clause it appears to be the argument that so long as the inter vivos trust was in existence at the time the Will was signed, and the trust is clearly identified by the Will, that it should be able to meet the test for incorporation by reference such that the “pour over clause” can be saved.

In Quinn Estate the court ultimately rejects the attempt to save the pour over clause under the doctrine of incorporation by reference, appearing to emphasize there is a fundamental flaw in the attempt to incorporate a trust by reference into a Will insofar as it does not appear to be the testator’s intention to actually incorporate the terms of the trust into the Will, but rather simply to make a distribution to the separate trust. When something is “incorporated by reference” into a Will it means exactly that, insofar as the terms of the separate document are said to be incorporated into the Will and read as a single document. This concept appears fundamentally at odds with any attempt to make a bequest to an already existing trust under a pour over clause, as the testator never likely intended to have the terms of the trust incorporated into the Will to be administered by the executor as part of the Will, but rather to have the executor make a bequest to the trust to be administered separately from the estate. In emphasizing this point the British Columbia Court of Appeal in Quinn Estate states:

“Strictly speaking, resorting to incorporation by reference to incorporate the original trust document into the will belies the essential nature of a pour-over clause: here it is perfectly clear that the will-maker had no intention of incorporating the trust into his will. He rather demonstrated the obvious intention of making a gift to the trust.”

As my blogs this week have shown, any attempt to leave a bequest in a Will to an already existing inter vivos trust using a “pour over clause” is highly problematic.

Thank you for reading.

Stuart Clark

24 Mar

Pour Over Clauses – Facts of Independent Significance

Stuart Clark Estate Planning Tags: , , , , , , , , , 0 Comments

Yesterday I blogged about the general use and availability of “pour over clauses” and whether you can leave a bequest in a Will to an already existing inter vivos trust. Although the answer to that question is “it depends”, as cases such as Quinn Estate v. Rydland, 2019 BCCA 91, have shown the court is generally reluctant to uphold these kinds of bequests due to the potential of amendments being possible in a way that contradicts statutory requirements, such that any individual considering a potential bequest to an already existing trust should proceed with extreme caution.

In ultimately refusing to uphold the bequest to the inter vivos trust in Quinn Estate the court provides an excellent summary of the typical arguments that are used to try to uphold “pour over clauses”, and why, in their opinion, they should not be available to save the bequest. One of these potential arguments is the doctrine of “facts of independent significance”.

The doctrine of “facts of independent significance” in effect provides that subsequent and independent facts of “significance” can have an effect on the interpretation and/or administration of Wills notwithstanding that such subsequent facts may not otherwise meet the formal requirements to amend or alter a Will. Examples that are often cited to are clauses such as those that would provide that property is to be divided “amongst my partners who shall be in co-partnership with me at the time of my decease” or to the “servants in my employ at my death“. As both of these classes of individuals can change after the Will has been executed, such that the individuals who may ultimately receive the gifts may be different at the time of death versus when the Will was executed, this can be seen as a potential exception to the general rule that the Deceased’s intentions must be clear at the time the Will was executed and cannot be altered unless in compliance with the strict statutory requirements.

In the case of pour over clauses, the potential argument to utilize the doctrine of facts of independent significance would appear to be that as the court allows certain bequests to be upheld notwithstanding that the circumstances surrounding the bequest could change after the fact, the potential of an inter vivos trust being varied after the signing of the Will should not automatically void the bequest.

The court in Quinn Estate ultimately rejected the potential use of the doctrine of “facts of independent significance” to save pour over clauses. In coming to such a decision the Court of Appeal notes:

Applying the doctrine to validate a pour-over clause would also differ in character to the existing applications recognized in the Anglo-Canadian jurisprudence. The traditional applications of the doctrine validate de facto amendments to the will only with regard to limited “facts”. The terms “partner” and “car” are inherently limited. A trust document recognizes no such limit. Extending the doctrine to pour-over clauses would grant testators unlimited power to amend the disposition of their estate without following the strictures of WESA. In my view, this is not an extension the common law should permit.” [emphasis added]

Although the Quinn Estate decision was a decision of the British Columbia Court of Appeal, as the Ontario statutory regime also does not appear to specifically contemplate the use and availability of “pour over clauses” it is likely that the same concerns referenced by the British Columbia Court of Appeal would be present in any attempt to uphold the use of pour over clauses under the doctrine of facts of independent significance in Ontario.

I will blog tomorrow about the concept of “incorporation by reference” as it relates to pour over clauses. Thank you for reading.

Stuart Clark

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