Tag: Testamentary Intent

19 Aug

Tax Apportionment in Multiple Wills

Suzana Popovic-Montag Estate Planning, Wills Tags: , , , , , 0 Comments

Drafting and administering multiple wills can be challenging. There is no shortage of potential pitfalls that can derail an otherwise well devised estate plan. Inadvertent revocation of the primary will, conflicts between multiple sets of Estate Trustees (“Trustee”), and limited liability protection for the Trustee of the non-probated will are just a few of the difficulties sometimes encountered. However, one of the most challenging aspects is determining from where the taxes will be paid. Tax apportionment can complicate the estate plan for the Testator and drafter early on in the process; or afterwards,  as the Trustee is left to interpret the directions (or lack thereof) in both wills.

For instance, two carefully drafted wills which seek to distribute the assets evenly among the Testator’s children can be significantly altered if the tax apportionment clauses do not reflect this intent. Imagine that one child receives real property under the primary will and the other receives privately owned shares of an equivalent value under the secondary will. If the income tax is payable solely from the assets of the primary will, one child may no longer receive an equal value of the estate; contrary to what the Testator intended.

There is some debate on whether the distinction between a one or two estate model can help determine tax apportionment issues. The question is whether the Testator has created two distinct estates or one estate that is governed by two documents?   Clare Sullivan suggests the latter; however,  Martin Rochwerg and Leela Hemmings advocate for the two estate model. They describe dual wills as dividing the estate into a primary and secondary estate. This distinction may have tax liability implications when the wills do not contain any tax apportionment clauses whatsoever. When the issue is one of interpretation, the answer is a much simpler one.

In interpreting tax apportionment questions, it all comes down to the Testator’s intent. The interpretation of wills is based on the armchair rule that seeks to place oneself in the mindset of the testator. The same approach is applied to interpreting from where the taxes will be paid when the wills are unclear. In other words, a close examination of both the primary and secondary wills themselves will determine where the Testator intended the tax to be paid from. External factors such as the sophistication of the testator may also be considered when interpreting the documents. If the wills are altogether silent, the default tax rules will apply.

From a practical perspective, this means that the issue of tax liability should always be stated in unequivocal terms in the wills. The Trustee, in administering the estate, should also never blindly assume that the tax is payable out of the primary will. They should carefully read the documents before making this determination and if it is unclear, an application to the court for interpretation is an available recourse.

Thank you for reading.

Suzana Popovic-Montag

 

20 Apr

Undue Influence or Intent to Benefit?

Hull & Hull LLP Estate & Trust Tags: , , , , , 0 Comments

In Modonese v. Delac Estate, 2011 BCSC 82 (CanLII) the deceased left her property to her two children equally in her Will but the bulk of her estate consisted of her house, which was transferred into joint tenancy with her son. The son and his wife and children had always lived with the mother in her home except for a 3-year period after an episode of violence by the son against the deceased. At the end of the day, the son was not a credible witness and the Court accepted evidence that the deceased intended her estate to be shared equally between her son and her daughter. 

Mondonese v. Delac Estate contains some useful discussion (below) regarding the “principled approach” to admissibility of hearsay evidence and the factors to be considered in determining whether there was undue influence. 

To be admissible, hearsay evidence must be:

a)      Necessary – the only available means of putting that evidence before the Court; and

b)      Reliable – there is no real concern about the truth of the statement because of the circumstances in which it was made and it can be sufficiently tested by means other than cross examination.

The two instances where the question of undue influence arises are:

a)       Where the gift was the result of influence expressly used by the donee for the purpose; and

b)       Where the relations between the donor and donee around the time of the gift were such as to raise a presumption that the donee had influence over the donor.

To rebut the presumption of undue influence, the defendant must show that the donor gave the gift as a result of her own "full, free and informed thought" in that:

a)      No actual influence was used or there was no opportunity to influence the donor;

b)      The donor had independent legal advice or the opportunity to obtain it;

c)      The donor had the ability to resist any such influence; and

d)      The donor knew and appreciated what she was doing.

Other relevant factors include undue delay in prosecuting the claim, acquiescence or confirmation by the deceased, and the magnitude of the benefit or disadvantage.

Sharon Davis – Click here for more information on Sharon Davis. 

19 Oct

Brother, Can You Spare a Dime?

Hull & Hull LLP Archived BLOG POSTS - Hull on Estates Tags: , , , 0 Comments

A question was recently posed to Ken Gallinger, an ethics columnist with the Toronto Star: was one of two brothers who received his father’s estate ethically obliged to share his entitlement with his disinherited brother?  The questioner stated that he was shocked that his father chose to make such a distribution when there was no indication that the father intended to treat his sons other than equally in his Will.  The advice of Gallinger was along the lines of: no, you are under no obligation to share the bequest…but… you would probably feel better if you did.

Estate litigation is one of the few areas of law where you could conceivably see the same question posed to an advice columnist as to a lawyer.  Reading the exchange between the questioner and Gallinger gave me pause to consider what my answer would be and, more to the point, to consider that I had yet to be asked that question.   

Lawyers can sometimes present as insensitive, hiding the fact that they have a personal, moral or spiritual viewpoint because it does not fall within the parameters of their retainer agreement with their clients. Paid by their clients to provide legal advice, lawyers are not expected to opine on the moral dilemma presented by an unexpected windfall.  Will challenges are concerned with ascertaining the true intentions of the testator, not with determining whether those intentions were motivated by bitterness or spite.  

In concluding his response to the question posed, Gallinger made the comment: "sometimes it’s better to be generous than right." Enough said.

Have a great weekend,

David

 

 

19 Jun

Testamentary Intent: Holograph Wills – Hull on Estates Podcast #64

Hull & Hull LLP Hull on Estates, Hull on Estates Tags: , , , , 0 Comments

Listen to "Testamentary Intent: Holograph Wills"

Read the transcribed version of "Testamentary Intent: Holograph Wills"

During Hull on Estates Episode #64, David Smith and Natalia Angelini discuss holograph wills generally with specific consideration of the Atherton Estate, Re, 2006 CanLII 30580 (ON S.C.)

21 Mar

Don’t be so literal! The importance of Testamentary Intent

Hull & Hull LLP Archived BLOG POSTS - Hull on Estates, Beneficiary Designations, Ethical Issues Tags: , , , , , , 0 Comments

In a recent decision out of Québec, Broodney v. Herzog [2006] Q.J. No. 14933, testamentary intent trumped the literal wording of a Will.

The testator had been involved in a loving relationship with Harry Broodney. They had lived together for twelve years. In a 1995 Will, the testator left Harry $25,000.00. In a 1998 Codicil, the gift was increased to $35,000.00, payable in monthly instalments of $600.00. In 1999, the testator executed a further Codicil, increasing the monthly payments to $1,000.00 but not changing the capital amount of the gift. Both the 1995 Will and the 1998 Codicil stated that the gift to Harry would lapse and be null and void, if he and the testator were “not living together” at the time of the latter’s death.

The issue for the Court of Québec was the meaning of the phrase “not living together”. At the time of the testator’s death, she had been living in a nursing home due to her deteriorating health. Her family consequently claimed that Harry was not entitled to the $35,000.00 gift.

The Court focused on the testator’s intentions. Her intent to benefit Harry was clear and uncontested. The Court held that the testator intended the phrase “not living together” to mean a “break up” with Harry. The evidence was clear that their loving relationship did not end when the testator involuntarily left Harry to reside in the nursing home. The evidence was also clear that the testator’s family was aware of the loving relationship. For the Court, the inability to physically live together could not be a reason for disinheriting Harry.

Not surprisingly, Harry asked for and received punitive damages as a result of the family’s refusal to honour the testator’s last wishes. The Court deemed the family’s refusal to be malicious and reckless.

The litigation could have been avoided by better wording in the Will. Drafting issues aside, the case is a good illustration of a Court employing common sense and testamentary intent to avoid an unjust result.

Have a great day!
Bianca

SUBSCRIBE TO OUR BLOG

Enter your email address to subscribe to this blog and receive notifications of new posts by email.
 

CONNECT WITH US

CATEGORIES

ARCHIVES

TWITTER WIDGET