Co-author: Scott Kuehn, Student-at-Law
On March 31, 2014, BC's new Wills, Estates and Succession Act1 ("WESA") will come into force. WESA introduces new protections for beneficiaries of estates that are in danger of being disputed or deemed ineffective by a court. These "vulnerable" estates arise primarily in two situations: (1) where there are issues of incapacity (mental or physical) relating to age or infirmity; and (2) where there is no will. Both situations have the potential to undermine a person's plans for how to distribute the assets in his or her estate, and can add significant time, expense, and uncertainty to the administration of an estate.
While most people have some idea of how they would like to divide their property when they pass away, insufficient estate planning remains a common problem that complicates the administration of vulnerable estates. This article will discuss new protections found in WESA as they relate to vulnerable estates, and will also canvass the ways in which the new Act may perpetuate, or even create, new pitfalls.
Protections & Pitfalls
WESA addresses many longstanding problems with the current estate administration scheme. It aims to make the law easier to understand, but also addresses shortcomings in the existing statutory scheme by consolidating and revising the Estate Administration Act,2 the Probate Recognition Act,3 the Wills Act,4 and the Wills Variation Act.5
Of these revisions, four in particular offer new protections to potential beneficiaries of vulnerable estates:
- marriage no longer revokes a will;
- undue influence is now presumed in certain circumstances;
- the distribution scheme for estates when there is no will
increases the spouse's share of the estate; and
- a beneficiary can now sue on behalf of the estate, with permission of the court, to recover property that should form part of the estate.
Would-be beneficiaries of vulnerable estates should also be
aware of two potential pitfalls that WESA either
creates or carries over from the existing legislation:
5. courts can now cure formal deficiencies in a will; and
6. the Wills Variation Act continues to apply, which may undermine other WESA protections.
Note that these pitfalls are not necessarily problems with WESA; indeed, some of these measures aim to protect classes of vulnerable would-be beneficiaries. These provisions are noteworthy, however, because they have the potential to delay or complicate the administration of an estate as a result of litigation that can be lengthy and complex, where the outcome of which is often highly uncertain.
1. Marriage will no longer revoke a will
Predatory marriages currently pose a real threat to the estates of persons with mental competence and capacity issues. Under the current law, marriage automatically revokes a will6 and the legal test for capacity to marry is very low: if a person can understand the nature of the marriage contract – cohabitation to the exclusion of all others – then he or she has the capacity to marry. Marriages late in life are not uncommon and, sadly, a person who suffers from mental capacity issues brought on by dementia or Alzheimer's disease might fall prey to an opportunistic would-be spouse.
Under WESA, marriage will no longer revoke a will. Instead, a will-maker can only revoke his or her will by: (a) making a new will; (b) writing a declaration that revokes all or part of the will; or (c) by destroying the will with the intention to revoke it.7 To make or revoke a will, the law requires a greater degree of mental capacity than that required to marry. As such, the new legislation will offer greater protection against predatory marriages.
2. Undue influence: a shift in the burden of proof
People can become increasingly isolated and vulnerable towards the end of their lives, and often become reliant on caregivers or others for assistance and companionship. Unfortunately, unscrupulous individuals who hold positions of trust sometimes use their position to threaten or otherwise unduly influence a will-maker into modifying a will in their favour.
There currently exists an "anomaly" in the law. The longstanding rule for gifts given during a person's lifetime is that certain relationships create a presumption that the recipient of the gift exercised undue influence over the other person. When such a presumption arises, the burden is on the recipient to prove that he or she did not exercise undue influence before the gift will be declared valid. However, to invalidate a gift made under a will, the current law puts the burden on the party alleging undue influence to prove actual undue influence, which can be difficult to do.
WESA extends the presumption of undue influence to gifts made under a will. The presumption arises when the beneficiary is "in a position where the potential for dependence or domination of the will-maker was present".8 Where the presumption applies, any gift to that person is presumed invalid and the burden is on the recipient to prove that no undue influence was exerted.
This provision provides a significant new protection for would-be beneficiaries of vulnerable estates: if a will-maker drafts or alters his or her will with a suspicious gift to their caregiver (for example), would-be beneficiaries need only allege undue influence, and will no longer bear the burden of proving it.
3. Surviving spouses will receive a larger share of intestate estates
A person who dies without a valid will has died "intestate". Intestacy is considered its own class of vulnerable estate, since the court will not give effect to the living wishes of the deceased without a properly drafted and executed will. Instead, the court must follow a statutory scheme to distribute the estate. The Estate Administration Act allocated the first $65,000 to the spouse as a preferential share, then divided the remainder of the estate between the spouse and the children.9 If there was a spousal home owned solely by the deceased, the spouse could continue, depending on his or her wishes, to remain in the spousal home for life.
The modifications found in WESA, on balance, serve to better protect the financial position of a surviving spouse. WESA modifies the old distribution scheme, giving a surviving spouse a larger preferential share of the estate: a spouse who had children with the deceased is entitled to $300,000. Anticipating the problem of predatory marriages, this share decreases to $150,000 if there are no children common to the deceased and the surviving spouse. After the spouse's preferential share is deducted, the remainder of the estate is split 50-50 between the spouse and the children. However, while WESA allows a surviving spouse to take a spousal house owned solely by the deceased as part of the spouse's share of the estate, it does not grant an automatic right to continue to occupy the spousal home.
4. Beneficiaries will have additional ways to recover property that has "disappeared"
Joint bank accounts, jointly held real estate, and other jointly held personal property does not generally form part of a person's estate. Instead, this property usually goes directly to the joint-holder who survives – this is known as the right of survivorship. It is not uncommon for an aging parent to add one of their children as a joint account holder to help manage their financial affairs or for tax planning reasons. Upon the parent's death, that child would be entitled to the whole account.
Under the current law, the estate can sue to get that money back. However, only the person named in the will manages the estate (what the WESA refers to as the "personal representative"). If the personal representative refuses to commence a legal proceeding or, even worse, is the person who has benefited from the right of survivorship, a potential beneficiary cannot sue on behalf of the estate to recover that money. WESA now permits beneficiaries in this situation to commence an action on behalf of the estate with leave of the court.
5. Courts given increased ability to cure deficiencies in a will
Under WESA, courts will finally have the authority to cure formal deficiencies in a will. Under the Wills Act, a will was irredeemably invalid if certain formal requirements were not met. The new provisions in WESA will allow formal deficiencies to be cured, and will give the court the power to rectify wills where the will-maker has made an accidental slip or omission.
This power to cure these formal deficiencies aims to protect beneficiaries by attempting to give effect to a will-maker's intentions. The court will decide these types of issues with reference to extrinsic evidence of the will-maker's intention. While certainly not a negative change in and of itself, this revision creates more fertile ground for estate litigation – which may add significantly to the time and effort required to settle or otherwise resolve an estate dispute.
6. The Wills Variation Act: still alive and well under WESA
The Wills Variation Act allows a court to alter a will that, in the court's opinion, fails to make adequate provision for the proper maintenance and support of the will-maker's spouse or children.10 In the past, courts have used this legislation to (sometimes dramatically) re-apportion the division of estates in spite of the clear intentions of a will-maker. The BC Law Institute recommended changes to remove adult children as claimants and allow contracting out of spousal rights; however, the BC government declined to adopt these recommendations. Instead, the Legislature essentially re-enacted the entire Wills Variation Act, unchanged, as part of WESA.
The re-enactment of the Wills Variation Act continues to have the potential to seriously undermine a will-maker's intentions, particularly for vulnerable estates. For example, a predatory spouse could conceivably use the Wills Variation Act provisions to argue for a re-distribution in his or her favour, essentially undoing the new protections offered by WESA. It remains to be seen how the courts will interpret the Wills Variation Act provisions in light of the other changes in WESA.
WESA enacts many changes with a view to protecting vulnerable estates and ensuring that the law gives full effect to the wishes of a will-maker. However, no legislation can remove all potential pitfalls, and hence, the potential for estate-related disputes remains and may increase in some respects with the new legislation. Changes to the wills and estates landscape such as the ones contained in WESA highlight the continued importance of careful estate planning.
6 Wills Act, supra note 4, s 14(1)(a).
7 WESA, supra note 1, s 55.
8 Ibid, s 52.
9 Estate Administration Act, supra note 2, s 85.
10 Wills Variation Act, supra note 5, s 2.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2014