Sunday, May 24, 2015

Fargey v. Fargey

If you want to ensure that your child or grandchild (or any other beneficiary) will not have control over an inheritance from you until he or she attains a more mature age than nineteen, the age of majority in British Columbia, then it is important that your will be drafted to avoid that beneficiary from being able to terminate the trust your create in your will for him or her. One way you may accomplish this is by providing that if the beneficiary dies before the age at which you wish to give the beneficiary control, his or her children will receive the funds held in the trust. But simply saying that a trustee will hold a beneficiary’s share until the beneficiary attains the age of say twenty-five will not do.

I have written before about the rule in Saunders v. Vautier (1841), 41 E.R. 482, allowing a beneficiary with legal capacity to terminate a trust if the beneficiary’s interest has fully vested, but the principle has been applied recently in British Columbia. The case is Fargey v. Fargey, 2015 BCSC 721.

Donald Robert Fargey in his will provided that if, as occurred, his wife and either of his two children died before him, the share of the deceased child, the trustee of his estate would hold the that share for each of that deceased child’s own children (Donald Fargey’s grandchildren) and:

invest and keep invested each such sub-share and to pay the income therefrom or so much thereof as may be necessary or advisable in my Trustee’s discretion for the grandchild’s maintenance, education or benefit during his or her minority, (any income not so paid in any year to be added to the capital of the share) and upon my grandchild attaining the age of twenty-five (25) years to distribute the capital of the sub-share to him or her.

The will did not contain a provision for anyone else if a grandchild died before the age of 25.

Donald Fargey’s son died before him, and his son had two children, Mathew Robert Fargey and Joseph Bartholomew Fargey. Mathew Fargey is an adult, but not yet 25, and Joseph Fargey is still a minor. Both grandchildren applied to court to terminate the trust, with Joseph Fargey’s mother bringing the application as his litigation guardian.

The two grandchildren relied on Saunders v. Vautier. In his reasons for judgment, Mr. Justice McEwan wrote at paragraph 7:

[7]             The authority cited by the petitioner is Saunders v. Vautier (1841), 41 E.R. 482 (Saunders). It was considered in British Columbia in Grieg v. National Trust Co. Ltd. (1997), 47 B.C.L.R. (3d) 42 (B.C.S.C.), where Grist J. observed:
4  Donovan Waters in The Law of Trusts In Canada, 2d Ed. (Toronto: Carswell, 1984) at 962-963, comments on the rule in Saunders v. Vautier (1841), 41 E.R. 482,

If there is only one beneficiary, or if there are several (whether entitled concurrently or successively), and they are all of one mind, and he or they are not under any disability, the specific performance of the trust may be arrested, and the trust modified or extinguished by him or them without reference to the wishes of the settlor or the trustees. (Approved in Re Johnston (1964), 48 D.L.R. (2d) 573 (B.C.S.C.) per Nemetz, J., as he then was).

In finding that Mathew Fargey was entitled to his share outright, Mr. Justice McEwan distinguished a Manitoba Court of Appeal case Fast v. Van Vliet, 49, D.L.R. (2d) 616, in which the court refused an order collapsing the trust where the will provided that a share of the will-maker’s estate would be divided between two named beneficiaries “upon their attaining the age of twenty-five years.” The majority of the Manitoba Court of Appeal held that the interest of each of the beneficiaries had not fully vested, but was contingent on each attaining the age of 25, which is when the division occurs.

In contrast, in Fargey, the division occurred on the date of Donald Fargey, and each of the two grandchildren’s shares vested at that time. The will did not postpone the gift, but rather the enjoyment of the gift.

Mr. Justice McEwan wrote:

[12]         What is clear in that case is that the will [in Fast] provided that the estate was not to be divided into shares for the beneficiaries until they attained the age of 25 years.

[13]         In contrast the shares in Donald Fargey’s will are to be created at the time of his death and the distribution of the share is postponed to the age of 25. It appears that what was anticipated was that equal shares would be created immediately and the income administered as the differing needs of the beneficiaries dictated, until their majority. There is then a gap until each share can be distributed to each brother as each attained the age of 25. The division into shares appears to take place before, not upon the attaining of the age of 25.

Because Joseph Fargey has not attained the age of majority, his share remains held in trust for him until he turns 19. But Mr. Justice McEwan made an order under the Trust and Settlement Variation Act allowing the trustee to use capital from Joseph Fargey’s share for his benefit before he attains the age of 19. This will allow the trustee to use funds to assist with his tuition at his school, which exceeds the income from his share.

Saturday, May 16, 2015

Re Beck Estate

In a previous post, I wrote about the first reported case applying section 58 of the Will, Estates and Succession Act. This section allows the court to give effect to a “record, document, or writing or marking on a will or other document” as a will even though it does not meet the signing and witnessing requirements for a valid will in British Columbia. We now have a second reported decision, Re Beck Estate, 2015 BCSC 676, released on April 29, 2015.

Celena Beck made a will on June 23, 2009. She appointed her son Dietrich Reimer as her executor, gave $25,000 to her granddaughter, and gave her two acre property and the residue of her estate to Deitrich Reimer and her daughterArlene Minshull. The will was made by a lawyer and was properly signed and witnessed.

On November 25, 2012, Ms. Beck made a handwritten record, which she entitled “Codicil to my last will at above date,” and which she signed. She also crossed out the word “codicil” in one place in her will, and wrote “Codicil Enclosed.” There were no witnesses to the handwritten note nor to the markings she added to her will. She gave the handwritten record to her son, the executor.

The contents of the handwritten note are described by Master Young as follows:

The Handwritten Record starts with the words:
Mrs. Celena P. Beck.
Having had my lawyer ‘Mr. Mote’ [sic] make out my will and with myself in my sound mind have been forced to change a few things stated in said will.
[10]         The Handwritten Record goes on to discuss the difficult relationship Arlene has had with the family and her brother, and Arlene’s occupation on her property since 1965. She expresses a wish that Arlene be left alone on the land that she has occupied and worked on over the years; and her wish that Arlene live there for the rest of her life and then leave the land to her only child, Wendy Reimer.

[11]         The Handwritten Record then says:

Rick as my trustee will see that $10,000 goes to my dead Grandsons [sic], son Adam Minshall [sic].
Any money left in Estate should help repair my run-down property.
This will be in Ricks [sic] capable hands.
This is the only Codicil (underlined in red ink) to my legal will.
Celena Pearl Beck.
To be read out by My Lawyer. Mr. Mote [sic] (in red ink)
I thank you (in red ink)

Master Young applied the Manitoba Court of Appeal decision in George v. Daily (1997), 143 D.L.R. (4th) 273 (a case I wrote about here), and Madam Justice Dickson’s decision in Young Estate, 2015 BCSC 182, and considered whether the Handwritten Note represented Ms. Beck’s “deliberate or fixed and final expression” of her wishes. Master Young found that the handwritten note did, but that the only enforceable provision was the gift to Adam Minshull.

Master Young wrote:

 [18]         The Handwritten Record is dated and signed and is written by the deceased. The executor recognizes the handwriting and signature as that of the deceased. Her signature is not witnessed. The wording, “Codicil to my last will” and the words, “To be read out by My Lawyer. Mr. Mote” [sic] suggests to me that this document contains a deliberate or fixed and final expression of intention as to the disposal of her property upon her death. Although the document does not make reference to funeral arrangements, it does make reference to the reading of the Will, which suggests a final expression.

[19]         The fact that the deceased gave this document to her executor for safekeeping one week before her death and told him that she thought the unwitnessed Codicil was a valid Codicil, reinforces my conclusion that this is a final expression of her testamentary intention.

[20]         Some of the content in the Handwritten Record is unenforceable. She speaks of her wish as to how her daughter will use the gift of property when she says:
Arlene must be left alone on the place she has worked all these years and made beautiful as a Park. I would like her to do so the rest of her life. Then leave it for her only child Wendy Reimer …
[21]         In Eberwein Estate (Re), 2012 BCSC 250, the executor sought advice and direction from the court regarding bequests in a Will which were unclear. The bequest that is relevant for this discussion was a gift of $1,000,000 to a beneficiary with direction that she invests the money to purchase a revenue-producing property. Madam Justice Griffin says:
[30]      Courts are greatly suspicious of attempts by testators to give with one hand and retain with the other. If an absolute gift is made, accompanied by uncertain language expressing a wish or request, the courts are reluctant to imply a trust: McIver Estate v. McIver, [1981] B.C.J. No. 68 (S.C.) at para 4; Sutherland Estate v. Nicoll Estate, [1944] S.C.R. 253 at 262, [1944] 3 D.L.R. 551 [sub. nom. Hayman v. Nicoll]. In the McIver case, the word “trust” was used and so the court did not consider the words to be “merely precatory or recommendatory”. However, in the present case, the word “trust” was not used in the clause at issue. Rather, I find that the words used here imposed no defined restrictions on the beneficiaries and are so loose that a trust could not have been intended by Ms. Eberwein, who was sufficiently sophisticated to have spelled out a trust clearly if that is what she intended.
[22]         Ms. Beck made an absolute gift of property to her daughter in the Will. The Handwritten Record contains uncertain language, expressing a wish as to how the property will be used. I do not find that the Handwritten Record creates a trust, but is an expression of wishes or recommendations.

[23]         The only clear gift contained in the Handwritten Record is the gift of $10,000 to “my dead Grandsons [sic], son Adam Minshall” [sic].

[24]         I find that this gift to Adam Minshull is a deliberate expression of the deceased’s wish and testamentary intention, so I will exercise the curative power under the authority of s. 58 of the WESA. I order that that portion of the Handwritten Record is fully effective, as though it had been made as part of the Will.

[25]         I have also considered the words:
Any money left in Estate should help repair my run-down property.This will be in Ricks [sic] capable hands.
 The residue clause in the Will says that the residue of the estate is to be divided between “Dietrick Reimer” [sic] and “Arlene Minshall” [sic]. I do not find that these words in the Handwritten Record constitute a deliberate expression of testamentary intention to vary the residue clause in the Will.

Saturday, April 25, 2015

2015 Federal Budget Contains Changes to Tax Free Savings Accounts and Registered Retirement Income Funds

The 2015 Canadian Federal Government’s Budget released on April 21, 2015 does not appear to contain any changes that will have an impact on trusts or estate-planning (perhaps mercifully given the problems created by the 2014 Budget). There are a couple of changes that will affect retirement savings.

First, the Government has increased the amount that you may put into a Tax Free Savings Account (“TFSA”), from $5,500 per year to $10,000 per year effective January 1, 2015. The Budget has a nice summary of how TFSAs work.

Available since January 1, 2009, the TFSA is a flexible, registered general-purpose  savings vehicle that allows Canadian residents aged 18 or older to earn tax-free investment income, including interest, dividends and capital gains. TFSAs can include a wide range of investment options such as mutual funds, Guaranteed Investment Certificates, publicly traded shares and bonds. Contributions to a TFSA are not tax deductible, but investment income earned in a TFSA and withdrawals from it are tax-free. Unused TFSA contribution room is carried forward and the amount of withdrawals from a TFSA can be re-contributed in future years.

TFSAs differ from Registered Retirement Savings Plans (“RRSPs”) in a few key ways. Unlike RRSPs, there is no tax deduction available when you contribute to a TFSA. But TFSAs can be withdrawn without tax, while you pay tax on RRSPs when you withdraw funds from them. With both TFSAs and RRSPs, funds can grow inside the plan without tax.

Generally, if you are in a low tax bracket, it probably makes more sense (and cents) to contribute the up to the maximum permitted in a TFSA in priority to RRSP contributions, especially if you think you may later end up in a higher tax bracket. TFSAs are also a better vehicle for saving for things other than retirement, such as buying a home.

But if you are in a high tax bracket, RRSPs may be preferable because you get the tax break when you contribute. The benefits of RRSPs are enhanced if you expect to be in a lower tax bracket in retirement.

Another key difference between RRSPs and TFSAs is that with an RRSP when you reach the age of 71, you have to either withdraw the funds from an RRSP, buy and annuity, or convert the RRSP to a Registered Retirement Income Fund (“RRIF”). In contrast, you can retain and continue to contribute to a TFSA until death.

I suspect the most common approach to RRSPs at 71 is to convert an RRSP into a RRIF. With a RIFF you are required to withdraw a minimum percentage each year, the percentage increasing with age. You may take out more than the minimum, but you pay tax on the withdrawals.

This brings me to the second change in the 2015 Budget. The Government has reduced the percentages that you have to take out of a RRIF each year, the effect of which is to allow you to defer tax longer. Here is a description from the 2015 Budget (tables omitted):

The basic purpose of the tax deferral provided on savings in RPPs and RRSPs is to encourage and assist Canadians to accumulate savings over their working careers inorder to meet their retirement income needs. Consistent with this purpose, savings inRPPs and RRSPs must be converted into a retirement income vehicle by age 71. Inparticular, an RRSP must be converted to a RRIF by the end of the year in whichthe RRSP holder reaches 71 years of age, and a minimum amount must be withdrawn from the RRIF annually beginning the year after it is established (alternatively, the RRSP savings may be used to purchase an annuity). This treatment ensures that the tax-deferred RRSP/RRIF savings serve their intended retirement income purpose.

A formula is used to determine the required minimum amount a person mustwithdraw each year from a RRIF. The formula is based on a percentage factormultiplied by the value of the assets in the RRIF. The percentage factors (the RRIFfactors) are based on a particular rate of return and indexing assumption. Currently, a senior is required to withdraw 7.38 per cent of their RRIF in the year they are age71 at the start of the year. The RRIF factor increases each year until age 94 when the percentage that seniors are required to withdraw annually is capped at 20 per cent.

The existing RRIF factors have been in place since 1992. Economic Action Plan2015 proposes to adjust the RRIF minimum withdrawal factors that apply in respectof ages 71 to 94 to better reflect more recent long-term historical real rates of  returnand expected inflation. As a result, the new RRIF factors will be substantially lower than the existing factors. The new RRIF factors will range from 5.28 per cent at age 71 to 18.79 per cent at age 94. The percentage that seniors will be required to withdraw from their RRIF will remain capped at 20 per cent at age 95 and above. Table A5.2 in Annex 5 shows the existing and proposed new RRIF factors.

By permitting more capital preservation, the new factors will help reduce the risk ofoutliving one’s savings, while ensuring that the tax deferral provided on RRSP/RRIF savings continues to serve a retirement income purpose. For example, the new RRIF factors will permit close to 50 per cent more capital to be preserved to age 90, compared to the existing factors (Table 4.1.2).

Sunday, April 12, 2015

Heathfield v. St. Jacques

Although the Wills, Estates and Succession Act has now been in effect for over a year, in most of the court cases being reported now, the Courts are dealing with the law as it stood before the effective date of March 31, 2014. This is because most of the provisions of the Wills, Estates and Succession Act only apply if the date of death occurred after the legislation came into effect. It is interesting to note how the law would have applied in some of the recent cases if the deceased had died on or after March 31, 2014.

The recent decision of Madam Justice Ballance in Heathfield v. St. Jacques, 2015 BCSC 505, provides an illustration.

When Michael Heathfield made his will on August 7, 2004, he was in a common-law relationship with Nicole St. Jacques. They had a child together with another on the way. In his will, he appointed Ms. St. Jacques as his executor. He left his estate to her if she survived him by thirty days, and if not, the will provided that his estate would be held in trusts for his children, until each attained the age of 25.

Mr. Heathfield and Ms. St. Jacques later separated. They divided their property. Their two children resided primarily with her, and he paid child support to her.

Instead of making a new will, Mr. Heathfield wrote in changes on his 2004 will, essentially stating that Ms. St. Jacques would not receive any of his estate, which would go to their two children. These changes were not witnessed by two witnesses as required under the Wills Act. He told others that he wanted his estate to go to his children, rather than to his former common-law spouse.

When Mr. Heathfield died on November 13, 2011, he left an estate valued at approximately $1.2 million.

Ms. St. Jacques as his executor obtained a grant of probate of the will.

The Public Guardian and Trustee of British Columbia brought an application under the Wills Variation Act on behalf of Mr. Heathfield’s two young children to vary the will. The Public Guardian and Trustee argued that the will should be varied so that the estate would be held in trust for each child until that child attains the age of 25, with the Public Guardian and Trustee acting as trustee of the funds.

Ms. St. Jacques opposed the application. She agreed that the estate should be used to benefit the two children, but argued that a formal trust was unnecessary. She as their mother would use the inheritance for their benefit. If the will was varied in favour of the two children, she asked the court to appoint her as trustee of funds.

In opposing the application to vary the will, Ms. St. Jacques relied on a previous Supreme Court of British Columbia decision, Cameron(Public Trustee of) v. Cameron Estate (1991), 41 E.T.R. 30, in which the Court declined to vary a will of a minor child’s mother. In that case, Mrs. Cameron left her estate to her husband, who was the father of the child. The trial judge found that Mr. Cameron was properly maintaining and supporting their child, and refused to vary the will.

Madam Justice Ballance varied Mr. Heathfield’s will by deleting the gift to Ms. St. Jacques, and creating trusts similar to those in the will for each of the two children in respect of the residue of the estate.

In arriving at her decision, Madam Justice Ballance declined to follow the decision in Cameron for two reasons. First, Cameron was decided before the Supreme Court of Canada’s decision in Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807, which provided a framework for determining if a adequate provision has been made, including an analysis of the will-maker’s legal and moral obligations to a spouse and children. Madam Justice Ballance expressed doubt as to whether Cameron is good authority for the proposition that a will should not be varied whenever a minor child’s surviving parent is the sole beneficiary of the will in light of the Tataryn framework.

Secondly, the circumstances in Heathfield are different. In contrast to Cameron, a case in which the court found that the wife and husband relied on each other to provide for their child, following his separation from Ms. St. Jacques, Mr. Heathfield made it clear that he did not rely on Ms. St. Jacques.

Madam Justice Ballance found that Mr. Heathfield had legal obligations to his children, as reflected in the child support he was paying, and moral obligations to them. In leaving a will that made no provision for them, Mr. Heathfield did not meet those legal and moral obligations. In contrast, he did not have those obligations to Ms. St. Jacques, who was not a person who could have applied to vary the will under the Wills Variation Act.

In her reasons for judgment, Madam Justice Ballance noted how the Wills, Estates and Succession Act has changed the law in a couple of respects that would have been significant to this case if Mr. Heathfield had died after it came into effect.

As she wrote at paragraph 82, under section 56, unless there is a contrary intention expressed in the will, “a gift to a person who has ceased to be a married spouse or a common-law spouse is revoked and must be distributed as if the surviving spouse had predeceased the will-maker.”

Section 58 of the Wills, Estates, and Succession Act would have allowed the court to give effect to Mr. Heathfield's handwritten notes on his will despite the fact that they were not witnessed if the court were satisfied that the notes represented his testamentary intentions.

Accordingly, if Mr. Heathfield had died on or after March 31, 2014, the children would likely have received his estate without having to resort to an application to vary the will under wills variation legislation (now Part 4, Division 6, of the Wills, Estates and Succession Act).

Madam Justice Ballance did accede to Ms. St. Jacques request that she be appointed as trustee of the trusts for the children, and she declined the Public Guardian and Trustee’s submission that Ms. St. Jacques should be restricted as trustee in her ability to access income from the trust for the benefit of the children.

Sunday, April 05, 2015

Larson Justice Center, Indio, California

I this photograph of the Superior Court of California, County of Riverside, Larson Justice Center, in Indio, California, a little over a year ago, in March 2014.

Wednesday, March 25, 2015

New Societies Act Introduced in British Columbia Legislative Assembly

The Government has introduced a new Societies Act in the Legislative Assembly. Bill 24 incorporates many of the recommendations made by the British Columbia Law Institute's Report on Proposals For a New Society Act, which can read here.

Tuesday, March 03, 2015

Court of Appeal Dismisses Appeal in Bentley v. Maplewood Seniors Care Society

In reasons for judgment released today in Bentley v.Maplewood Seniors Care Society, 2015 BCCA 91, The British Columbia Court of Appeal has upheld Mr. Justice Greyell’s decision dismissing a petition brought by Margaret Anne Bentley’s family seeking declarations requiring the care facility she was in to discontinue providing food and water to her.

I have written about Mr. Justice Greyell’s decision in greater depth in my previous post here, but in a nutshell Mrs. Bentley is suffering from the final stages of Alzheimer’s disease, and is incapable of communicating, walking, meeting her own care needs, or eating. She is offered nutrition by staff placing a spoon to her mouth. If she opens her mouth, she is given the food. If not, she is prompted a second time, but if she still does not accept the food, the staff do not attempt to force her to eat. Based on her communications at a time when she was clearly capable of making her own decisions, her family were of the view that she would not wish to be kept alive on this basis.

In the Supreme Court of British Columbia, Mr. Justice Greyell applied the presumption that a person is capable of making his or her own personal care decisions, and found that the family had not rebutted the presumption that Mrs. Bentley, despite her limitations, was capable of deciding whether to eat and drink when she either opened her mouth or kept her mouth closed when prompted.

Mr. Justice Greyell also considered whether British Columbia’s substitute decision making statutes authorized a substitute decision maker to make a decision to refuse personal care necessary to preserve life, and concluded, that in contrast to health care in some circumstances, the legislation did not allow a substitute decision maker to refuse personal care if doing so would cause the person to die.

The family members who had petitioned the Court appealed on the following grounds:

A.         The learned Chambers Judge erred in law by failing to address whether [Mrs. Bentley] had consented to the process of “prodding” and “prompting” that precedes her being fed by Maplewood.

B.         The learned Chambers Judge erred in law by placing the onus on [Mrs. Bentley] to prove a “clear refusal of consent”, rather than placing the onus on Maplewood to prove consent by [Mrs. Bentley] to being “prodded” and “prompted”.

C.        The learned Chambers Judge erred in law by failing to find that, in the absence of consent to the process described above, a battery is committed by Maplewood when it prods and prompts [Mrs. Bentley].

A person commits the tort of battery if he or she touches another in a non-trivial manner without the other’s consent.

Madam Justice Newbury for the Court of Appeal rejected all three grounds, finding that Mr. Justice Greyell did at least implicitly find that she was consenting, communicating her consent through her behaviour in accepting or not accepting nutrition. She also rejected the argument that the Mr. Justice Greyell placed the onus on the Petitioners to prove that Mrs. Bentley did not consent.

The Court of Appeal decided this case on the relatively narrow grounds that the evidence supported Mr. Justice Greyell’s finding that Mr. Bentley is consenting to the provision to her of food and water. The Court of Appeal did not expressly decide whether the balance of his reasons deciding that Mrs. Bentley’s family could not require the care facility to stop providing her with nutrition in this manner even if she were incapable of deciding whether to accept the provision of food and drink.

Madam Justice Newbury wrote at paragraph 18:

[18]        In closing, I emphasize again that the scope of this appeal was a narrow one and that none of the chambers judge’s conclusions regarding the documents executed by Mrs. Bentley, the applicability of the various statutes to them, or the determination of her wishes was appealed. I recognize the terribly difficult situation in which Mrs. Bentley’s family find themselves and I appreciate the disappointment they must feel in being unable to comply with what they believe to have been her wishes and what they believe still to be her wishes. It is a grave thing, however, to ask or instruct caregivers to stand by and watch a patient starve to death. It should come as no surprise that a court of law will be assiduous in seeking to ascertain and give effect to the wishes of the patient in the ‘here and now’, even in the face of prior directives, whether clear or not. This is consistent with the principle of patient autonomy that is also reflected in the statutes referred to earlier (see especially s. 19.8 of the HCCCFA Act), and in many judicial decisions, including Carter v. Canada(Attorney General) 2015 SCC 5, where the Court emphasized that when assisted suicide is legalized, it must be conditional on the on the “clear consent” of the patient. (Para. 127.)