Please read the disclaimer before perusing the following article.
(written 1992, published Beef in B.C. Jan/Feb 92, slight revisions 2002)
One of the supreme frustrations of people making wills is that they may not have the final say on how their property is divided up on their death. There are several ways that wills can be challenged. There are also some ways that you can ensure that property ends up in the hands of the person that you want to have it.
The Wills Variation Act (B.C.) is a provincial statute which says that the spouse or children of a deceased person can apply to the Supreme Court to change the terms of a person’s will, if the spouse or children believe that they have been unfairly treated in the will. They may, or may not, be successful in having the will changed. The legislation is there for good reason. Occasionally someone takes an unreasoning dislike to, and disinherits, a family member who ought to receive the estate or a portion of it. Perhaps the most serious of these situations is when the spouse who holds title to all the family assets completely disinherits the other, wholly dependent, spouse. The legislature has decreed that a judge should be able to remedy that situation if the judge believes that it is the correct thing to do.
The legislation is most often used by children claiming against a parent. The most common claimants are (a) children of a first family claiming against a parent who has a second, younger, family and who has chosen to meet the needs of the second family and exclude the first family in his will; and (b) children who are left out or who are to receive an unequal proportion of the estate. It is nearly impossible to predict the outcome of a Wills Variation application. Some are successful or partly successful. Some fail completely. Most of the time (but no longer in every case), the court-awarded costs of all parties will be paid out of the estate.
If you are a potential claimant, your court action must be started within six months of the grant of probate.
Occasionally a will contains words that could have more than one meaning, or there may be a question about the precise meaning of the works in the will. In those situations, the will must be interpreted by a court. A court application can only be avoided if all beneficiaries and potential or contingent beneficiaries agree on the meaning to be attributed to the words in the will.
Wills must be written with the utmost precision. For example, a clause that says your estate is to be divided equally between your spouse and your three children, may be interpreted to mean that your spouse is to receive half of the estate and your children split the other half. If however you say that your estate is to be divided equally among your spouse and your three children, it is more likely that your spouse will receive one-quarter and your three children each receive one-quarter. This is because ‘between’ implies a two-party division, and ‘among’ implies a division between more than two parties.
Where there is a question about the meaning of a will, the lawyer for the executor will advise the executor not to guess at the meaning, but to get a court order to say which is the correct meaning. If the executor guesses, he or she might later be found to have made the wrong choice, and would then be personally liable for the wrong guess—an unattractive prospect to most executors.
If there is a question whether or not the will was properly signed and witnessed, or the testator had the mental acuity to make a will, or was subject to duress or undue influence, someone may claim that the will is invalid.
If such a claim is made, it is up to the executor and the beneficiaries under the will to prove that the will was properly signed and witnessed. Then it is up to the claimants to show that the testator did not have mental capacity sufficient to make a valid will, or that duress or undue influence existed to the extent that the testator did not exercise his own free will in distributing his estate.
If the will was not properly signed and witnessed or there was a lack of capacity, or duress or undue influence exist, the purported will is invalid. If there is a previous valid will, the estate will be distributed according to its provisions. If there was no previous valid will, the estate will be distributed according to the Estate Administration Act (B.C.).
If someone has contributed towards your acquiring property, you may be required to hold part of your interest in the property for the contributor. In other words, the title to the property may be in your name, but in fact the ‘true’ or beneficial owner of that asset may be you and someone else. To the extent that you hold part of your property in trust for someone else, that ownership interest is not part of your estate.
A clear example of a trust is where property is bought in the name of person ‘A’, but person ‘B’ contributed half of the purchase price. In that case ‘A’ is trustee of the property, and the true or beneficial owners are ‘A’ as to a half interest and ‘B’ as to a half interest.
Most trusts are less clear, because the investment by the person not on title may have been made over time, or in the form of uncompensated labour.
Trust claims are becoming more common where a claimant believes that he or she has contributed to assets acquired by the deceased person.
Before making any changes to the way you hold assets, you must consult your lawyer and tax advisor with respect to your own situation and possible legal and tax results of any changes. Given the complexity of the tax regime these days, you can get yourself in a whole pile of expensive trouble by not checking the repercussions before you rearrange your assets.
Some assets which you own during lifetime do not form part of your estate, and so do not form a part of your estate. This means that an estate challenge does not affect these assets.
Property in joint tenancy passes to the surviving joint tenants(s) on the death of one of the joint tenants. It does not form a part of your estate and your will does not attach to it. You must use the words ‘as joint tenants’ when putting property into joint tenancy. However a trust claim can still be made to an asset in joint tenancy. There are also increasing questions, especially with respect to bank accounts in joint tenancy between an aged parent and one of several children, whether a true joint tenancy resulted, or whether the recipient child holds the bank account in trust for the parent.
Insurance or other contractual rights such as RRSPs, usually allow you to designate a beneficiary. If that beneficiary is a named person other than your estate, the property will pass to the beneficiary quite outside the terms of your will, and like property in joint tenancy, does not form part of your estate. If the beneficiary dies before you, the insurance or RRSP then forms part of your estate and your will applies to it. An interesting side-note on RRSPs is that while the RRSP goes to the designated beneficiary, the tax on the RRSP is a liability of your estate. The tax bill is borne by the people who receive the residue of your estate.
If you give some of your property away during your lifetime, obviously you do not own it when you die and it does not form a part of your estate. Obviously, though, you should make sure that you have no further use for it, because upon making the gift it belongs to the person to whom the property is given.
Giving property away during your lifetime includes giving your property to a trust which during your lifetime, may benefit you and on your death may benefit other people. With recent changes to the income tax rules about trusts, trusts are an estate-planning technique which will be more commonly used in the future.
Wills can be contested on a number of grounds described above. One way to make sure that a wills contest does not affect the distribution of your assets, is to put them into joint tenancy, or a trust, or otherwise designate someone by contract to receive the benefit on tenancy, or a trust, or otherwise designate someone by contract to receive the benefit on your death. This does, however, mean that you have given up some of the rights to deal with your property during your lifetime, in order to ensure that it goes where you want it to go on your death.
Estate planning is complex process. Consult capable professional advisors, especially tax advisors, before making decisions or implementing any kind of plan.