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31 May 2023

OBA Trusts And Estates Law Section Insider Publishes Jennifer Corak's "Revocation Of Beneficiary Designations By Will And The Case Of Alger v Crumb"

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Wills and Estates lawyer Jennifer Corak's article "Revocation of Beneficiary Designations by Will and the Case of Alger v Crumb" was published in Section Insider from the Ontario Bar...
Canada Family and Matrimonial

Wills and Estates lawyer Jennifer Corak's article "Revocation of Beneficiary Designations by Will and the Case of Alger v Crumb" was published in Section Insider from the Ontario Bar Association's Trusts and Estates Law Section. Jennifer explores the complexities surrounding the revocation of beneficiary designations and the meticulous interpretation of the revocation clause under the Succession Law Reform Act.

The article was originally published on May 2, 2023. To read it in OBA Trusts and Estates Law Section Insider, visit: OBA.org - Revocation of Beneficiary Designations by Will and the case of Alger v Crumb

Revocation of Beneficiary Designations by Will and the Case of Alger v Crumb

As part of the estate planning process, Will drafting lawyers turn their mind to the testator's assets. This includes considering whether there are any assets with designated beneficiaries and whether the testator's Will should revoke existing beneficiary designations. In the recent Ontario Court of Appeal case of Alger v Crumb,1 the court was faced with the question of whether a Will's general revocation clause revoked certain RRIF and TFSA beneficiary designations executed prior to the Will.

The testator, Theresa Lorraine Crumb, passed away on June 18, 2020, with a Will dated May 9, 2019 (the "Will"). She had four children – the appellants and the respondents. Two of her children, Robert Crumb and Karen Black, who are the appellants in this case, are named as estate trustees. The Will provides a $20,000 bequest to each of the respondents, some smaller bequests, and then leaves the residue of the estate to the appellants. At her death, the testator possessed RRIF plans and a TFSA plan, the beneficiaries of which were her four children, equally. The instrument(s) designating her children as beneficiaries were executed before the Will.2

The general revocation clause found in the Will is as follows:

I HEREBY REVOKE all Wills and Testamentary dispositions of every nature and kind whatsoever made by me heretofore made.

The appellants' position was that the general revocation clause revoked the beneficiary designations such that the plans formed part of the estate to be distributed in accordance with the terms of the Will. The respondents then brought an application to have the issue determined by the court.

The application judge ultimately found that the beneficiary designations were not revoked by the general revocation clause. More specifically, the application judge found that:

1) the beneficiary designations by instrument(s) of the RRIF and TFSA plans are testamentary dispositions at law; 2) therefore, without s. 52(1) of the SLRA, the general revocation clause would be effective to revoke those designations; 3) following this court's decision in Laczova Estate v. Madonna House (2001), 207 D.L.R. (4th) 341 (Ont. C.A.), 2001 CanLII 27939, because the general revocation clause in this will does not relate expressly to the designations, it does not comply with s. 52(1) of the SLRA; 4) the Superior Court of Justice decision in Ashton Estate v. South Muskoka Memorial Hospital Foundation, 2008 CanLII 21421 (Ont. S.C.), which held that a general revocation clause did comply with s. 52(1) is "plainly wrong" in law and fails to apply the analysis in Laczova; 5) because the decision is plainly wrong in law, the judge was not obliged to follow that decision; 6) the general revocation clause in the testator's will did not revoke her beneficiary designations by instrument(s) of her four children in equal shares for her RRIF and TFSA plans.3

On appeal, the two issues were:

1) whether the application judge was correct in law by finding that the general revocation clause in the testator's will failed to expressly refer to the prior designations of beneficiaries by instrument(s) and therefore was not effective under s. 52(1) of the SLRA to revoke those designations; 2) whether the decision in Ashton Estate regarding the effectiveness of a general revocation clause in a will is correct.4

After providing background on the enactment of the Ontario Succession Law Reform Act5(the "SLRA") in 1977 and a discussion of Part III of the SLRA relating to Designations of Beneficiaries of Interest in Funds or Plans, the appeal decision explains:

[15] Section 51 of the SLRA sets out the approach to designations in Ontario. Under s. 51(1), a participant is able to designate a beneficiary of a benefit payable under a plan on the participant's death through two mechanisms: (a) a signed instrument, or (b) by will. Where a party elects to designate a beneficiary by will, the designation is only effective "if it relates expressly to a plan, either generally or specifically": SLRA, at s. 51(2). A later designation will revoke an earlier designation where there is inconsistency: SLRA, at s. 52(2).

[16] Section 52 of the SLRA sets out the approach to revocations in Ontario. Participants may revoke a designation of a beneficiary through the two mechanisms set out above for designations: SLRA, at s. 51(1). However, a revocation in a will is only effective to revoke a designation made by instrument where it relates "expressly to the designation, either generally or specifically." Whereas s. 51(2) requires that a designation by will relate expressly to a plan, s. 52(1) requires that a revocation in a will relate expressly to the designation.6

Interpreting the revocation clause in this case, the Court first considered whether the reference to "testamentary dispositions" included the designations of beneficiaries by instrument of the RRIF and TFSA plans. Referencing the cases of MacInnes v MacInnes7 and Amherst Crane Rentals Ltd. v. Perring,8 the Court agreed with the application judge that the designations of beneficiaries by instrument(s) of the RRIF and TFSA plans are testamentary dispositions and are therefore included within the meaning of "testamentary dispositions" found in the general revocation clause. At footnote 3, the decision also points out there is academic discussion regarding whether all beneficiary designations are testamentary dispositions but that for the purposes of this decision if the beneficiary designations in question were not testamentary dispositions the general revocation clause in question would have no application to them.

Next, the Court questioned "whether the revocation of 'all...Testamentary dispositions of every nature and kind whatsoever' relates 'expressly to the designation, either generally or specifically.'"9 The first component of this statutory requirement is that the revocation must relate to the designation as opposed to the plan. The Court found that since a beneficiary designation by instrument is a testamentary disposition at law, the general revocation clause related to the designation, satisfying the first component.

The second component of the statutory requirement is that the revocation must relate to the designation "expressly..., either generally or specifically". Agreeing with the application judge, the Court found that since the general revocation clause did not relate expressly to the beneficiary designations made by the testator for her RRIF and TFSA plans, the general revocation clause does not comply with s. 52(1) of the SLRA and therefore was not effective to revoke the designations of beneficiaries by instrument(s) of the RRIF and TFSA plans. As part of this stage of the analysis, the Court stated that for the term "expressly" to have any effect, it must mean something beyond a general category. The Court noted synonyms for the word "expressly" found in the thesaurus feature of Microsoft Word and the 2nd edition of the Oxford Thesaurus of English in support of its conclusion.

Although not necessary to decide what forms of wording would comply with the aforementioned requirement (a point acknowledged in the decision itself), the Court provides the following example of wording that in its view would have been sufficiently express and general:

I hereby revoke any and all beneficiary designations by instrument that I have heretofore made on any fund or plan as defined in the Succession Law Reform Act.

Further, the Court provided the following example of wording that in its view would have been sufficiently express and specific:

I hereby revoke the beneficiary designations on my RRIF and TFSA accounts at Scotiabank.

With respect to the second issue on appeal, the Court found that the application judge was correct in finding that the interpretation of the general revocation clause in Ashton Estate should not be followed, noting that the result of Ashton Estate appears to nevertheless be correct under s. 52(2) of the SLRA.

The appeal was dismissed with costs to the respondents.

Overall, there are many components that make up a complete estate plan, one of which is the proper designation of beneficiaries (even if it is ultimately decided that the beneficiary is to be the testator's estate). It is important to canvass with a testator their wishes regarding their plans (such as RRIFs, RRSPs and TFSAs) and ensure that the proper process to designate beneficiaries or revoke beneficiary designations, as the case may be, is followed.

Footnotes

1. 2023 ONCA 209 [Alger].

2. The instrument(s) designating beneficiaries did not form part of the record of the application.

3. Supra note 1 at para 10.

4. Ibid at para 11.

5. RSO 1990, c S.26 [SLRA].

6.Supra note 1 at paras 15 and 16. The wording of section 52(1) of the SLRA is as follows: "52 (1) A revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically." It is noteworthy that, as is discussed in the Alger decision, designation and revocation by will and by instrument are treated differently in the statute, with designations and revocations by will carrying certain statutory prerequisites where designations and revocations by instrument do not.

7. [1935] S.C.R. 200, 1934 CanLII 16.

8. (2004), 241 D.L.R. (4th) 176 (Ont. C.A.), 2004 CanLII 18104, leave to appeal to S.C.C. refused, [2004] S.C.C.A. No. 430.

9.Supra note 1 at para 25.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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