Written on behalf of Feigenbaum Consulting
The use of multiple wills is a common strategy used in estate planning. However, in 2018, an Ontario case invalidated the primary will for uncertainty and called into question this commonly used technique. The Ontario Court of Appeal recently overturned this controversial decision.
A mother and father died on the same day in October 2017. They each left mirror primary wills and secondary wills, dated 2016. The wills named their daughter, their account and their lawyer as executors (together, the “executors”).
Each primary will was submitted to the Ontario Superior Court along with applications for a “Certificate of Appointment of Estate Trustee with a Will Limited to the Assets in the Will” (“Certificate of Appointment”).The primary wills addressed the distribution of all property with the exception of certain assets, and other assets that the trustees would determine not to be included. The secondary wills covered all property and specifically included the excluded assets as decided by the trustees.
The application judge took issue with the wording of the wills. He began his decision by asking: “Is a will that grants the executors the discretion to determine what property is subject to the will a valid will?”. He found that the language in the primary will that conferred discretion on the trustees created uncertainty regarding the subject-matter of the secondary will because each clause failed to identify the deceased’s property to which it applied.
In his reasons, the judge also stated: “A will is a form of trust. In order to be valid, a will must create a valid trust and must satisfy the formal requirements of the Succession Law Reform Act (“SLRA”). He further set out thata valid trust, and therefore a will, must demonstrate “certainty of intent to create the trust, certainty as to the subject-matter or property committed to the trust, and certainty as to the objects of the trust or the purposes” (i.e., the “three certainties”).
The judge stated:
“The Secondary Will of each testator vests in the executors all property of the testator and therefore satisfies the requirement of certainty of subject-matter. No property of the testator of any kind is excluded from the trust created by the Secondary Will even though it provides that it does not revoke the primary will. The Primary Will, by contrast, effectively vests in the executors the entire discretion to determine retroactively whether any assets were vested under the will at death based upon the executors’ view as to whether probate is necessary or desirable.”
As a result, the “three certainties” were not met and the application judge found the secondary will valid, but declared the primary will to be invalid. The executors appealed to the Court of Appeal.
The executors submitted the following issues, among others:
1) Did the application judge err in holding that a will is a trust?
2) Did the application judge err in holding that the “three certainties” determine the validity of a will?
The Court of Appeal began by explaining that the use of primary and secondary wills is common. The purpose of their use is often meant to reduce tax payable pursuant to the Estate Administration Tax Act to avoid the delay associated with obtaining a Certificate of Appointment or to preserve privacy in respect of certain assets. It also stated that the validity of the use of multiple wills has been confirmed by Ontario case law. The court said:
“Because a testator often executes their Last Will and Testament several years in advance of death, it is often not practical to provide a definitive list of assets which will require or do not require a Certificate of Appointment to be transferred or realized at the time the Primary and Secondary Wills are executed. To overcome this practical problem, estate planning lawyers often provide estate trustees with the power to determine whether a particular asset requires a Certificate of Appointment upon administering the will. These clauses are often referred to as allocation clauses. The use of allocation clauses is a common estate planning technique.”
The court noted that “the fact that an allocation clause is discretionary does not mean that the power conferred by it can be exercised arbitrarily. The power of an executor to allocate must be exercised in accordance with the standards applicable to a fiduciary.”
The court then reviewed the application judge’s statement that a “will is a trust” and was therefore subject to the “three uncertainties”. It found that there was no basis for this conclusion. The court stated that a will is not a trust and the application judge made an error in law. As a result, the “three uncertainties” did not apply.
In addition, the court stated that, even if a will is a trust and is subject to the “three uncertainties”, the primary will remains valid. It stated, in part:
“The property in the Primary Wills can be clearly identified because there is an objective basis to ascertain it; namely whether a grant of authority by a court of competent jurisdiction is required for transfer or realization of the property. As a result, the Executors can allocate all the deceased person’s property between the Primary and Secondary Wills on an objective basis.”
As a result, the court found that the subject-matter of the primary wills was certain. It allowed the appeal and set aside the application judge’s decision.
If you or a loved one are planning on the distribution of an estate in preparation for a future event such as a will, it is important to speak to a trusted legal advisor. It is usually best to plan an estate ahead of time, to foresee issues before they arise and have them handled according to the wishes of the grantor.
For assistance, Contact Mark Feigenbaum, Barrister and Solicitor online or call him at (905) 695-1269 or toll-free at (877) 275-4792.