Tag: stoor estate

21 Aug

Henson Trust – What happens if there is no residuary gift-over?

Stuart Clark Estate & Trust Tags: , , , , , , , , , , , , , , 0 Comments

The Henson Trust has become fairly common estate planning tool for those looking to provide a bequest to someone who may be receiving government benefits such as ODSP without such an individual losing their qualification to the government benefits. At the core of the Henson Trust is the concept that the trust is wholly discretionary, with the assets that are placed in the trust not “vesting” in the beneficiary who is receiving the government benefits until the trustee has decided to make a distribution in their favour. This allows the trustee to ensure that the beneficiary does not receive a greater amount from the trust in a given time period than allowed under the government benefits, such that the beneficiary can continue to receive their government benefits as well as receive funds from the trust.

But what happens to any funds that may be left in the trust upon the death of the beneficiary for whom the Henson Trust was primarily established? Typically, the terms of the trust will provide for a “gift-over” of any residue to an alternate beneficiary. If the trust fails to provide for such a “gift-over” however, it could have significant repercussions to the primary beneficiary for whom the Henson Trust was established, and could result in the Henson Trust being declared void.

For a trust to exist it must have what are known as the “three certainties”. They are:

  1. Certainty of Intention – It must be clear that the settlor intended to create a trust;
  2. Certainty of Subject Matter – It must be clear what property is to form part of the trust; and
  3. Certainty of Objects – It must be clear who the potential beneficiaries of the trust are.

A trust that does not have the “three certainties” is an oxymoron, insofar as there can be no trust that offends the three certainties as the trust failed to be established. In the circumstance contemplated above, the lack of “gift-over” upon the primary beneficiary’s death would arguably equate to there being a lack of “certainty of objects”, insofar as it is not clear who all of the potential beneficiaries of the trust are. If it is found that the trust does offend the “certainty of objects” it would fail. Should the trust fail, the primary beneficiary for whom the Henson Trust was established would no longer have the funds which would have formed the Henson Trust available to top up the funds which they receive from their government benefits, with such funds likely now forming part of the residue or being distributed on a partial intestacy.

Although the historical application of the “three certainties” would result in the Henson Trust contemplated above having been declared void from the beginning, insofar as no trust that offends the three certainties can be found to exist, it should be noted that the court in Stoor v. Stoor Estate, 2014 ONSC 5684, went to great lengths to avoid such an outcome. In Stoor Estate, notwithstanding that the court found that the trust in question failed as a result of it offending the three certainties for a lack of “certainty of objects”, the court delayed the failure of the trust until after the primary beneficiary’s death believing that it was in keeping with the testator’s intentions.

There has been significant debate about whether the Stoor Estate decision was correctly decided, and what impact, if any, it should have upon the historical application of the “three certainties”. What is not in debate however is that it is important that when drafting a Henson Trust, or any trust for that matter, to ensure that you provide for a gift-over of the residue upon the primary beneficiary’s death. If you fail to provide for such a gift-over you run the risk that the trust will be declared void for offending the three certainties, thereby depriving the individual for whom you were establishing the Henson Trust the opportunity to receive such funds in addition to their government benefits.

Thank you for reading.

Stuart Clark

19 Mar

The Three Certainties: Certainty of Objects

Hull & Hull LLP Beneficiary Designations, Litigation, Trustees, Wills Tags: , , , , , , , , 0 Comments

In order for a trust to be valid, three certainties must be met: intention; subject matter; and objects.  Often referred to as the ‘three certainties’ principle, stemming from the 1840’s English decision in Knight v. Knight, it is an ever popular blog topic on Hull & Hull’s Toronto Estate Law Blog.  A recent decision out of the Ontario Superior Court of Justice revisits the importance of the certainty of objects principle notwithstanding the ‘worthiness’ of such a gift.

In Stoor v. Stoor Estate, the Applicant was the named beneficiary of a trust, which included a gift over provision, in his late mother’s Will.  As the only child, the Applicant sought relief, in part, that the gift over provision found in the trust failed for uncertainty of objects.

Certainty of objects requires one to say with certainty whether any given individual is or is not a member of the class: Baden’s Deed Trust (No. 2) (Re).

Part XI of the Will directed the estate trustee to distribute the residue of the Applicant’s Trust,

…following the payment of any outstanding debts, charges, taxes and expenses of the said Paul Stoor Trust, all the rest and residue of the said Paul Stoor Trust shall be paid to my Trustees for distribution to any and all worthy individuals and or causes who shall be alive or in existence at this time, as my Trustees may, from time to time, in their absolute and unfettered discretion consider advisable“.

In determining whether the gift over fails for certainty of objects, Justice Himel considered the SCC decision in Brewer v. McCauley which held that it is the testator, through their Will, that must dispose of their property.  Accordingly, this cannot be delegated to the estate trustee, unless the gift is for charitable purposes, at which time the selection of the charities may be delegated.

A helpful summary on charitable trusts and the exceptions conferred to them, can be found at this Hull & Hull blog.

Notwithstanding the fact that the testator in Stoor Estate sought to benefit worthy individuals/ causes, Justice Himel provided case law and authority that ‘worthy causes’ or ‘worthy objects’ are not trusts for charitable purposes.

Therefore, it was held that the gift over to “…any and all worthy individuals and or causes” is void for certainty of objects.

Noah Weisberg

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