DEALING WITH BENEFICIARIES

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Types of Gifts

Gifts may be of personal property (such a gift is sometimes called a bequest) or real property (sometimes called a devise).

Gifts may be conditional. Conditional gifts may depend upon a particular event taking place, or a particular situation existing.

The will-maker may make specific bequests, giving particular assets to named individuals, or may broadly divide the estate assets among groups named as “issue” or “children.” If the will is so broadly worded that it makes gifts to unnamed “heirs” or ”descendants,” it may be unclear who they were meant for, so those gifts may be distributed as if the will-maker had died intestate.[1].

Gifts made for charitable purposes[2] may be subject to the Charitable Purposes Preservation Act, which ensures that the gift continues to be used for those charitable purposes.

Gifts may also include heritage or cultural property[3] that is subject to the First Peoples' Heritage, Language and Culture Act, or Provincial heritage objects[4] designated under the Heritage Conservation Act. If you have doubts as to whether any land or objects included in the will may be designated for heritage or cultural protection, a lawyer will be able to advise you.

Failed Gifts

A gift in a will might fail if there is no beneficiary to receive it: perhaps the beneficiary died before the will-maker, or the identity of the beneficiary is too uncertain. Perhaps the gift to that beneficiary was invalid or has been revoked. A gift might also fail if there is no gift to give, perhaps because the will-maker no longer owns it or it no longer exists when the will-maker dies.

Generally, a gift that exists but cannot be given to the beneficiary will go into the residue of the estate, unless the will specifies an alternate way of dealing with it.

Lapse and Survivorship

A beneficiary must survive the deceased will-maker for five days[5] in order to take a gift under the will. If the will makes a gift to a person who dies before the will-maker, or dies less than five days after the will-maker, the gift to that person is said to lapse.

If a gift fails because the beneficiary has not survived the will-maker, the will might have a provision for giving it to another beneficiary. If the will doesn’t specify an alternate beneficiary, and if the beneficiary was a brother, sister, or child of the will-maker, the gift would go to the descendants of that brother, sister or child. Failing that, it would go into the residue of the estate (The Wills, Estates, and Succession Act (WESA), s. 46).[6]

For example: Two spouses have left their entire estates to each other in their wills, and have not named alternate beneficiaries. Tragically, they are both seriously injured in the same accident. One dies immediately, and the other dies four days later. Neither will inherit under the other’s will. Both of their estates are administered as if they had died without wills.

Invalid Gifts

Gifts that a will-maker may have made under duress or subject to undue influence may not be valid. It used to be that people who witnessed a will could not also be beneficiaries. The concern is that witnesses may be in a position to exercise undue influence or duress over the will-maker. Under WESA,[7] witnesses may be able to inherit if they are able to show the court that the will-maker was not improperly influenced in making the gift.

Revocation

A gift in a will to a spouse can be revoked[8] where the will-maker and that spouse later cease to be spouses. If the will-maker and that spouse have reconciled at the date of the will-maker’s death, there is no revocation.

Ademption

A will cannot make a gift of an asset that the will-maker does not own.[9] But if the will-maker owned the asset and it was sold by a person acting on behalf of the will-maker, the beneficiary may be entitled to an asset or amount of equivalent value from the estate.[10]

Uncertainty

A gift to a person whose identity is unclear, or to a charity or other organization that is not clearly identified, may fail for uncertainty.

A gift may also fail for uncertainty if the gift is made for a specific purpose, but that purpose is unclear or cannot be accomplished.

In order to save some gifts made to charities for specific purposes, the Law and Equity Act allows that where a gift in trust seems to be made for purposes that are not entirely charitable, instead of leaving the gift to fail for uncertainty, it is to be made entirely for the charitable purpose.

Charitable trusts

47 If a person gives, devises or bequeaths property in trust for a charitable purpose that is linked conjunctively or disjunctively in the instrument by which the trust is created with a noncharitable purpose, and the gift, devise or bequest would be void for uncertainty or remoteness, the gift, devise or bequest is not invalid as a result but operates solely for the benefit of the charitable purpose.

Dependants’ Relief

Spouses and children of the deceased may be named as designated beneficiaries in a workplace benefit or pension plan held by the deceased, or they may be entitled to various benefits or pensions.

  • There may be benefits available from the federal government, such as through the Canada Pension Plan or veterans’ benefits
  • There may be benefits available from the BC government, such as through a housing subsidy.
  • If the deceased was a member of a First Nation, there may be assistance in handling the estate available from the federal government.
  • If the deceased had a workplace benefit plan, there may be insurance, a pension, or benefits available for the surviving dependants.

Go carefully through the Checklist “What to Do When Someone Has Died” to remind you to contact Service Canada, or Service BC, the employer’s plan administrator, or the agencies that may be able to help.

If the deceased died without providing adequately for dependants such as a spouse or children, there may be a dispute and even possibly lawsuit seeking to vary the terms of the will. For more, click here.

Depending on how the deceased died, there may also be court action where dependants could receive money to compensate them for their loss. The Family Compensation Act[11] sets out how to bring this action, and a lawyer can advise you if this applies.

The Family Compensation Act also allows the family members of a deceased person to sue an estate.[12] If an action is launched against the estate you are administering, you should discuss this with a lawyer.

Family Compensation Actions and Conflicts of Laws

Other jurisdictions have similar legislation to provide dependants with relief when a family member dies, so if the deceased died in an accident while travelling outside BC and another person was killed in that accident, there may be an action launched in the jurisdiction where the accident occurred.

It becomes complicated when there are laws of another jurisdiction that apply. This is not something you should try to handle yourself. You will need legal advice, and you may need to hire a lawyer in the other jurisdiction.

Disputes

Disputing an Estate Grant

A person is entitled to oppose an application[13] for an estate grant by filing a Notice of Dispute[14] in Form P29.[15] The Notice is essentially in effect for a year and can be renewed once without leave of the court. After the Notice of Dispute is filed, an estate grant will not be made until

  • a period of one year passes without the Notice having been renewed, or
  • the will is proved in solemn form, or
  • the Notice of Dispute is withdrawn (in Form P30),[16] or
  • the court orders that it be removed (in Form P31).[17]

Wills Variation Claims

When a person dies leaving a will, any spouse or child of the deceased can ask the court to vary the will[18] by claiming that the will doesn’t adequately provide for him or her.

The current law, WESA, has not changed the law on wills variation claims that was set out under the old law, the Wills Variation Act.[19] So cases that were decided under that old act are still relevant.

A will-maker generally has a moral duty (as recognized at law) to provide for a spouse and children in the will. However, there are circumstances where there may be no such duty, or where excluding some beneficiaries or dividing an estate unequally might be just and equitable.

You should seek legal advice if there is any risk of a dispute among beneficiaries or if there are any spouses or children who have been disinherited or provided for in what seems to be an unequal manner.

For additional discussion of wills variation proceedings, click here.

For more information about disputes over interpreting the will, click here.


Note!! Limitation period on
making a wills variation claim = 180 days

Providing for Spouse and Child

In Tataryn v. Tataryn Estate,[20] the Supreme Court of Canada identified relevant factors in determining whether a will-maker has made adequate, just and equitable provision for a spouse or child. That case involved a will-maker who had wanted to disinherit one child, leaving the bulk of the estate to the other, and limiting the surviving spouse’s control over the estate. The Supreme Court of Canada discussed the needs, moral claims, and legal claims of the parties, and increased the legacies to the spouse and disinherited child.

The circumstances that might support or negate a will-maker’s moral duty to provide for an adult child were recently identified in Brown v. Pearce Estate:[21]

  1. Contribution and expectation: Contributions by the child in the form of caring for the will-maker or growing the will-maker’s estate will generally serve to strengthen the moral obligation. Also, promises made by the will-maker as to supporting the spouse may give rise to expectations that would affect what is fair and just in the circumstances.
  2. Misconduct/Poor character: Section 6(b) of the Act empowers the court to refuse variation to a person whose character or conduct, in the opinion of the court, disentitles him or her to relief. Such misconduct is measured as at the date of death, not subsequently, and must be directed at the will-maker. Generally speaking, the conduct must be relatively severe in order to justify disinheritance.
  3. Estrangement/Neglect: A will-maker might not have a moral duty to an adult child if there had been a long period of separation or estrangement that was caused by the child.
  4. Gifts made in the will-maker’s lifetime: Where a will-maker has transferred assets or made gifts to a child during the will-maker’s lifetime, there might be no further duty to provide in the will. On the other hand, if the will-maker has made greater gifts to other children, there may be a duty owed to the child who received less.
  5. Unequal treatment of children: Unequal treatment of children may be fair in the circumstances, depending on their relative independence and needs, and considering what other gifts or benefits they had been given, but the presumption is that independent adult children should be treated equally.
  6. Will-maker’s reasons for disinheritance: Where a will-maker gives reasons for providing only a small (or no) inheritance to a spouse or child, the court considers whether those reasons are valid and rational: “valid” reasons are rooted in fact, and “rational” means there is a logical connection between these reasons and withholding inheritance. If those reasons seem valid and rational, then the burden shifts to the person challenging the will to show why they are not.

Adoption

Generally, when a birth parent (called a “pre-adoption parent” in WESA) gives a child up for adoption, that child loses the legal right to inherit from the birth parent, unless that child is named in the will. Similarly, a birth parent who gives a child up for adoption loses any legal right to inherit from the deceased child, except if the child names that parent in a will (WESA, s. 3).

Effect of Adoption

WESA, s. 3 (0.1) In this section, "pre-adoption parent" means a person who, before the adoption of a child, was the child's parent.

(1) Subject to this section, if the relationship of parent and child arising from the adoption of a child must be established at any generation in order to determine succession under this Act, the relationship is to be determined in accordance with the Adoption Act respecting the effect of adoption. (2) Subject to subsection (3), if a child is adopted, (a) the child is not entitled to the estate of his or her pre-adoption parent except through the will of the pre-adoption parent, and (b) a pre-adoption parent of the child is not entitled to the estate of the child except through the will of the child. (3) Adoption of a child by the spouse of a pre-adoption parent does not terminate the relationship of parent and child between the child and the pre-adoption parent for purposes of succession under this Act.

A birth parent (or certain relatives of a deceased birth parent) may be able to unseal adoption records in an effort to locate a child who was given up for adoption, subject to restrictions under the Adoption Act.[22]

The Adoption Act[23]also permits the original identity of an adopted child to be disclosed if it allows that child to receive a benefit.

Family Assets

“Family assets”[24] or “family property” generally means property in which both spouses have a legal interest. It may be formally owned by one, while the other spouse holds an unregistered interest, as in a constructive trust. If the spouses separate, family property would be valued and generally divided equally between the spouses. Excluded property is not generally divided.

Discuss with your lawyer whether any of the estate assets are excluded assets.

Excluded Assets

Excluded assets for the purposes of the Family Law Act, S.B.C. 2011, c. 25, s. 85, are assets that are not shared family assets but belong to one spouse alone. This may include such things as property owned by one spouse before the relationship began, or a family heirloom inherited by one spouse. Excluded property will not generally be divided (Family Law Act, s. 96) or subject to a claim by the non-owning spouse.

Disposition

You and the beneficiaries will want to know when you might be able to distribute the estate to the beneficiaries, and when this matter might be finally wound up. It is difficult to forecast these dates with any degree of certainty. Various factors may influence the speed with which matters can be resolved, before you can proceed to closing matters.

You may be waiting for creditors to respond to a published Notice to Creditors, or a person may have filed a Notice of Dispute that will prevent disposition until it is resolved, or there may be a claim for variation. Any of these could delay disposition while you wait for time periods to elapse or seek to resolve the claims.

Generally the soonest you could expect to start disposition is 180 days (six months) after the estate grant is issued.

That 180 days is to give beneficiaries who might want to file a claim for variation 180 days from the date of grant to do so.
If you suspect there may be a claim, wait an additional 30 days because persons who make a claim will have 30 days after they file to notify you.

Executor’s Year

As an executor, you will have what is called an “executor’s year” (which is a year from the date of the deceased’s death) before you must distribute the deceased’s estate to the beneficiaries. The reason for this executor’s year is that it gives you an opportunity to identify and gather in all the estate assets and to pay all debts.

For this year after the deceased’s death, the estate could be treated as a separate taxpayer with respect to the income it earns. This tax treatment is only available to the extent that the estate, and the income earned by it, is not distributed to the beneficiaries during that period.

It may be, depending on the income situation of each of the beneficiaries, that there is some tax advantage[25] You should seek professional advice from a lawyer or accountant. to having the estate not distribute assets to beneficiaries until just before or after the first anniversary of the deceased’s death. If some of the beneficiaries are already paying income tax at high marginal rates, there may be a significant tax saving if the estate files as a separate taxpayer and pays at the lowest possible marginal rates.

Resources

Online Resources

Legislation

Regulation and Forms

References

  1. WESA, s. 42 [1]
  2. Charitable Purposes Preservation Act, S.B.C. 2004, c. 59
  3. First Peoples' Heritage, Language and Culture Act, R.S.B.C. 1996, c. 147, s. 9.
  4. Heritage Conservation Act, R.S.B.C. 1996, c. 187, s. 9.
  5. WESA, s. 10 [full text: http://canlii.ca/t/8mhj]
  6. WESA, s. 46 [full text: http://canlii.ca/t/8mhj]
  7. WESA, ss. 40 and 43 [full text: http://canlii.ca/t/8mhj]
  8. WESA, s. 56 [full text: http://canlii.ca/t/8mhj]
  9. WESA, s. 51 [full text: http://canlii.ca/t/8mhj]
  10. WESA, s. 48 [full text: http://canlii.ca/t/8mhj]
  11. Family Compensation Act, R.S.B.C. 1996, c. 126 [full text: http://canlii.ca/t/840l]
  12. Family Compensation Act, s. 5 [2]
  13. WESA, s. 106 [full text: http://canlii.ca/t/8mhj]
  14. Rule 25-10 [3]
  15. www.ag.gov.bc.ca[4]
  16. www.ag.gov.bc.ca [5]
  17. www.ag.gov.bc.ca [6]
  18. “Division 6 - Variation of Wills” in Part 4 of WESA, ss. 60-72 [Link: http://canlii.ca/t/8mhj]
  19. Wills Variation Act, R.S.B.C. 1996, c. 490 (no longer in force)
  20. [1994] 2 S.C.R. 807, 1994 CanLII 51 [7]
  21. Brown v. Pearce Estate, 2014 BCSC 1402 [8]
  22. Adoption Act, R.S.B.C. 1996, c. 5, s. 71. [link: http://canlii.ca/t/84g5]
  23. Adoption Act, R.S.B.C. 1996, c. 5, s. 61. [link: http://canlii.ca/t/84g5]
  24. Family Law Act, S.B.C. 2011, c. 25, s. 85
  25. This is not intended to be legal or tax advice.
  26. www.cbabc.org [9]
  27. www.cle.bc.ca [10]
  28. www.bcheritagelaw.com
  29. www.lawsociety.bc.ca [11]
  30. www.lawsociety.bc.ca [12]
  31. canlii.ca[13]
  32. canlii.ca[14]
  33. canlii.ca [15]
  34. canlii.ca [16]
  35. canlii.ca [17]
  36. www.ag.gov.bc.ca [18]