A few days ago, my colleague, Daniel Paperny, posted an excellent blog on a recent case, Re Milne Estate.[1] I want to add a few thoughts about some fundamental issues raised by Justice Dunphy in the case. Although I do not intend to cover the same ground my colleague has also covered very well, I am perforce obliged to sketch the background again.
Mr. and Mrs. Milne died on the same day. They each left a Primary Will and a Secondary Will. This is a common estate planning device, the purpose of which is to dispose of property for which probate is required in the Primary Will and to dispose of other property in the Secondary Will. This can save the estate a significant amount in estate administration taxes. However, it is not always clear when a testator makes a will whether probate may be required of specific assets. That may not be known until after the testator’s death when the estate trustees commence administration and they discover that one or more institutions require probate before they will release funds, even though the testator and her solicitor assumed that no probate would be required for those assets.
The Milnes were therefore advised to leave that decision to the estate trustees by giving them power to determine whether probate would be required for specific assets. Thus each Primary Will gave the estate trustees “all property owned by me at the time of my death EXCEPT . . . [certain named assets and] any other assets for which my Trustees determine a grant of authority by a court of competent jurisdiction is not required for a transfer or realization thereof.[2] The Secondary Will took great care not to revoke the Primary Will and gave the estate trustees “all property owned by me at the time of my death INCLUDING . . . [certain named assets and] any other assets for which my Trustees determine a grant of authority by a court of competent jurisdiction is not required for the transfer or realization thereof”.
The estate trustees brought two “Applications for Certificate of Estate Trustee with a Will (Individual Applicant) Limited to the Assets Referred to in the Will”, that is, one for the Primary Will of each of Mr. and Mrs. Milne.
Justice Dunphy held that the Secondary Wills were valid, because they each gave the estate trustees all the property of each testator. However, His Honour held that the Primary Wills were invalid, because they gave the estate trustees the discretion to determine retroactively whether any assets passed to them at death. As a practical matter this made no difference, since the Secondary Wills included all the property of the respective testators. Thus, there would not be an intestacy.
Justice Dunphy came to this conclusion by holding that a will “is a form of trust. In order to be valid, a will must create a valid trust”.[3] With great respect, this is an entirely novel view and, in my opinion, it is incorrect. His Honour does not cite any authority for this proposition and, indeed, I doubt that there is one. A will may contain a trust and most modern wills do, but a will does not have to contain a trust. And more especially, a will is not itself a trust. It is a testamentary instrument that typically appoints estate trustees and disposes of the testator’s property. If it were a trust, one would expect that to be part of the definition of “will” in the Succession Law Reform Act,[4] but is not.
Section 2(1) of the Estates Administration Act[5] also creates a statutory “trust” when it states: “All real and personal property that is vested in a person without a right in any other person to take by survivorship, on the person’s death . . . devolves to and becomes vested in his or her personal representative from time to time as trustee for the persons by law beneficially entitled thereto . . .” However, that does not happen by virtue of the will, but rather in spite of it. Indeed, the section applies whether the person dies testate or intestate. Moreover, as I discussed at length in a recent article, this statutory trust is not a true trust, but was imposed to prevent the application of the common law remainder rules to testamentary dispositions.[6]
Having decided that a will is a trust, Justice Dunphy then segues into trust law and concludes that for a will to be valid, it must satisfy the “three certainties”, that is, “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”.[7]
His Honour finds that there is “no evidence to suggest that the testators lacked the intent to create a testamentary trust” and also that there is no issue about certainty of objects. The two clauses quoted above refer to “Trustees”, so presumably both the Primary and Secondary Wills did create testamentary trusts. And thus the testators must have intended to create such trusts. But that is not the real issue, which is whether they intended to create a valid will.[8]
With respect to certainty of subject matter, His Honour opined that this certainty must be satisfied at the time the trust is created, that is, at the date of the testators’ deaths. In his view giving a power to the estate trustees to determine retroactively whether any particular assets are included in the Primary Wills is the same as giving them a power to determine which assets will be subject to the trust. His Honour said: “The testator must settle upon the Estate Trustees assets that are specifically identified or are objectively identifiable by reference to the intention of the testator and not the subsequent decision of the Estate Trustees”.[9]
Is this really so? In my respectful opinion Justice Dunphy made a mistake at the outset by treating a will as a trust and that then led him to apply trust principles to what is really a probate issue. This leads me to consider two separate, but interrelated issues. The first is the nature of a will; the second is the discrete role of a court of probate.
A will is an instrument that normally disposes of the testator’s property, takes effect only on her death and neither before[10] nor after, is revocable until the testator’s death and is made animo testandi.[11] Normally a will makes a donative disposition of the testator’s property.[12] However, a will is nonetheless valid if it does not dispose of the testator’s property, but rather the property of another, as when the testator exercises a power of appointment by will.[13] Indeed, a testamentary document that merely appoints an executor is a will and can be probated.[14] In that case the executor has been entrusted with the administration of the estate and can distribute the property as on an intestacy. Nonetheless, normally a will disposes of the testator’s property.
But to determine whether a will does dispose properly of a testator’s property does not require reference to trust principles. As I explained at great length in another article, courts of probate had their own rules to determine whether a will was valid and equity played no role in that determination.[15] Those rules were transferred to the superior courts when the surrogate courts were abolished and they are still valid.[16] Thus, for example, equity raises a rebuttable presumption of undue influence in the context of inter vivos gifts when the donee stands in fiduciary or confidential relationship toward the donor and then the onus shifts to the donee to rebut the presumption. But when it is alleged that a donee has exerted undue influence over a testator when he made his will, the law of probate does not raise such a presumption. Instead, the person attacking the will always has the onus of proving the existence of the undue influence. This distinction was recently recognized and affirmed by the Ontario Court of Appeal.[17]
I agree with Justice Dunphy that the role of a court of probate is inquisitorial and that the court is entitled to construe a will in order to ascertain whether the documents presented constitute the testator’s last will. The court determines whether a document is testamentary by asking whether “it was the testator’s intention that the gifts made by it should be dependent on his or her death”.[18] Clearly, if the court determines, upon construction of the document, that the maker of it intended the gifts to take effect before or after her death, it is not testamentary and cannot be probated.[19] The court will also ensure that the document was executed and attested in accordance with the statutory formalities and remains unrevoked, that the testator had capacity and was not subjected to undue influence, and that the will was unconditional.
Thus the jurisdiction of the court of probate to construe a document is limited to determining whether it is testamentary in nature. The court cannot go beyond that and venture into the jurisdiction of the court of construction. It is, of course, true that the Superior Court now exercises both the probate and construction jurisdictions. But since the rules for the two differ, they should not be exercised concurrently, save in very exceptional circumstances.[20] Thus, the court of probate should complete its work and thereafter the court of construction can construe the will if necessary.
In my respectful opinion therefore Justice Dunphy exceeded his jurisdiction when he concluded that the Primary Wills were invalid on their face because they gave power to the estate trustees to determine that probate was not required for certain assets.
There is another point to consider as well. Testators have employed various powers of appointment in their wills for a long time and their validity was not questioned until the 20th century, when dicta in a number of cases expressed the view that it is impermissible to delegate your testamentary power. However, that view has been discredited and in Re Nicholls[21] Krever J.A., who delivered the judgment of the Court of Appeal, confirmed that the use of powers of appointment in wills is valid.
In a recent blog, I wrote about delegating one’s testamentary power and went on to explain that a testator can also name persons in his will who can appoint the executors of the will and the trustees of a testamentary trust or their replacements.[22] I noted that this ability to delegate the power to appoint executors is quite old and one that was it was recognized by the Ecclesiastical Courts that preceded probate courts and never questioned by them.
That being so, why should giving a power to estate trustees to determine whether certain assets do or do not require the imprimatur of a court of probate be disallowed? Arguably it is also a delegation of one’s testamentary power. It is clear that the Milnes were disposing of their property, so their wills were testamentary. Only they needed the intervention of their estate trustees to determine whether probate was necessary for certain assets. In my respectful opinion that does not offend any principle of probate law. Moreover, since it is a device that can enable estates to avoid having to pay estate administration tax when that is unnecessary, the law should facilitate the device, rather than hinder it.
—
[1] 2018 ONSC 4174.
[2] Emphasis in para. 2 of the Reasons for Judgment.
[3] Ibid., para. 14.
[4] R.S.O. 1990, c. 26, s. 1(1).
[5] R.S.O. 1990, c. E.22, emphasis supplied.
[6] See Albert H. Oosterhoff, “Locus of Title in an Unadministered Estate and the Law of Assent” (2018), 48 Adv. Q. 41, at 56-64 (§2.7 and Excursus).
[7] Milne, supra, para. 15.
[8] Ibid., para. 16.
[9] Ibid. para. 23.
[10] Cf. Hebr 9:17.
[11] I.e., with the intention of making a will. See Williams on Wills, 10th ed. by Francis Barlow, Richard Wallington, Susannah L. Meadway, and James MacDougald, assisted by Charlotte Kynaston (London: LexisNexis, 2014), §1.2
[12] Ram v. Prasad (1999), 28 E.T.R. (2d) 140 (B.C.C.A.), affirming (1998), 23 E.T.R. (2d) 296 (B.C.S.C.); Prouse v. Scheuerman, 2001 BCCA 100, 197 D.L.R. (4th) 732.
[13] See the definition of “will” in s. 1(1) of the Succession Law Reform Act, supra.
[14] Brownrigg v. Pike (1882), 7 P.D. 61.
[15] Albert H. Oosterhoff. “The Discrete Functions of Courts of Probate and Construction” (2017), 46 Adv. Q. 316 (“Oosterhoff, Discrete Functions”).
[16] Ibid., §§2.2 and 4 (and Excursus), and passim.
[17] In Seguin v. Pearson, 2018 ONCA 355, paras. 10, 11.
[18] Macdonell, Sheard and Hull on Probate Practice, 5th ed. by Ian M. Hull and Suzanna Popovic-Montag (Toronto: Thomson Reuters/Carswell 2016), p. 300, citing, inter alia, Re Pfrimmer, 1936 CarswellMan 22, [1936] 2 D.L.R. 1 W.W.R. 609 (C.A.).
[19] See, e.g., Norman Estate v. Watch Tower Bible and Tract Society of Canada, 2014 BCCA 277, 99 E.T.R. (3d) 1; Goetz v. Goetz, 2014 ONSC 729, 99 E.T.R. (3d) 167.
[20] See Re Ali Estate, 2011 BCSC 537, 69 E.T.R. (3d) 303, paras. 43-47; Hon. Maurice Cullity. “Rectification of Wills – A Comment on the Robinson Case”, (2012), 31 E.T.P.J. 127 at 141-42; Oosterhoff, Discrete Functions, supra, §5.6
[21] (1987), 57 O.R. (2d) 763, 34 D.L.R. (4th) 32 (C.A.)
[22] “Delegating the Power to Appoint Executors”. http://welpartners.com/blog/2018/08/delegating-the-power-to-appoint-executors/. Posted 7 August 2018; “Delegating the Power to Appoint Executors – Update”. http://welpartners.com/blog/2018/08/delegating-the-power-to-appoint-executors-update/. Posted 26 August 2018.
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Written by: Albert Oosterhoff
Posted on: September 26, 2018
Categories: Commentary
A few days ago, my colleague, Daniel Paperny, posted an excellent blog on a recent case, Re Milne Estate.[1] I want to add a few thoughts about some fundamental issues raised by Justice Dunphy in the case. Although I do not intend to cover the same ground my colleague has also covered very well, I am perforce obliged to sketch the background again.
Mr. and Mrs. Milne died on the same day. They each left a Primary Will and a Secondary Will. This is a common estate planning device, the purpose of which is to dispose of property for which probate is required in the Primary Will and to dispose of other property in the Secondary Will. This can save the estate a significant amount in estate administration taxes. However, it is not always clear when a testator makes a will whether probate may be required of specific assets. That may not be known until after the testator’s death when the estate trustees commence administration and they discover that one or more institutions require probate before they will release funds, even though the testator and her solicitor assumed that no probate would be required for those assets.
The Milnes were therefore advised to leave that decision to the estate trustees by giving them power to determine whether probate would be required for specific assets. Thus each Primary Will gave the estate trustees “all property owned by me at the time of my death EXCEPT . . . [certain named assets and] any other assets for which my Trustees determine a grant of authority by a court of competent jurisdiction is not required for a transfer or realization thereof.[2] The Secondary Will took great care not to revoke the Primary Will and gave the estate trustees “all property owned by me at the time of my death INCLUDING . . . [certain named assets and] any other assets for which my Trustees determine a grant of authority by a court of competent jurisdiction is not required for the transfer or realization thereof”.
The estate trustees brought two “Applications for Certificate of Estate Trustee with a Will (Individual Applicant) Limited to the Assets Referred to in the Will”, that is, one for the Primary Will of each of Mr. and Mrs. Milne.
Justice Dunphy held that the Secondary Wills were valid, because they each gave the estate trustees all the property of each testator. However, His Honour held that the Primary Wills were invalid, because they gave the estate trustees the discretion to determine retroactively whether any assets passed to them at death. As a practical matter this made no difference, since the Secondary Wills included all the property of the respective testators. Thus, there would not be an intestacy.
Justice Dunphy came to this conclusion by holding that a will “is a form of trust. In order to be valid, a will must create a valid trust”.[3] With great respect, this is an entirely novel view and, in my opinion, it is incorrect. His Honour does not cite any authority for this proposition and, indeed, I doubt that there is one. A will may contain a trust and most modern wills do, but a will does not have to contain a trust. And more especially, a will is not itself a trust. It is a testamentary instrument that typically appoints estate trustees and disposes of the testator’s property. If it were a trust, one would expect that to be part of the definition of “will” in the Succession Law Reform Act,[4] but is not.
Section 2(1) of the Estates Administration Act[5] also creates a statutory “trust” when it states: “All real and personal property that is vested in a person without a right in any other person to take by survivorship, on the person’s death . . . devolves to and becomes vested in his or her personal representative from time to time as trustee for the persons by law beneficially entitled thereto . . .” However, that does not happen by virtue of the will, but rather in spite of it. Indeed, the section applies whether the person dies testate or intestate. Moreover, as I discussed at length in a recent article, this statutory trust is not a true trust, but was imposed to prevent the application of the common law remainder rules to testamentary dispositions.[6]
Having decided that a will is a trust, Justice Dunphy then segues into trust law and concludes that for a will to be valid, it must satisfy the “three certainties”, that is, “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”.[7]
His Honour finds that there is “no evidence to suggest that the testators lacked the intent to create a testamentary trust” and also that there is no issue about certainty of objects. The two clauses quoted above refer to “Trustees”, so presumably both the Primary and Secondary Wills did create testamentary trusts. And thus the testators must have intended to create such trusts. But that is not the real issue, which is whether they intended to create a valid will.[8]
With respect to certainty of subject matter, His Honour opined that this certainty must be satisfied at the time the trust is created, that is, at the date of the testators’ deaths. In his view giving a power to the estate trustees to determine retroactively whether any particular assets are included in the Primary Wills is the same as giving them a power to determine which assets will be subject to the trust. His Honour said: “The testator must settle upon the Estate Trustees assets that are specifically identified or are objectively identifiable by reference to the intention of the testator and not the subsequent decision of the Estate Trustees”.[9]
Is this really so? In my respectful opinion Justice Dunphy made a mistake at the outset by treating a will as a trust and that then led him to apply trust principles to what is really a probate issue. This leads me to consider two separate, but interrelated issues. The first is the nature of a will; the second is the discrete role of a court of probate.
A will is an instrument that normally disposes of the testator’s property, takes effect only on her death and neither before[10] nor after, is revocable until the testator’s death and is made animo testandi.[11] Normally a will makes a donative disposition of the testator’s property.[12] However, a will is nonetheless valid if it does not dispose of the testator’s property, but rather the property of another, as when the testator exercises a power of appointment by will.[13] Indeed, a testamentary document that merely appoints an executor is a will and can be probated.[14] In that case the executor has been entrusted with the administration of the estate and can distribute the property as on an intestacy. Nonetheless, normally a will disposes of the testator’s property.
But to determine whether a will does dispose properly of a testator’s property does not require reference to trust principles. As I explained at great length in another article, courts of probate had their own rules to determine whether a will was valid and equity played no role in that determination.[15] Those rules were transferred to the superior courts when the surrogate courts were abolished and they are still valid.[16] Thus, for example, equity raises a rebuttable presumption of undue influence in the context of inter vivos gifts when the donee stands in fiduciary or confidential relationship toward the donor and then the onus shifts to the donee to rebut the presumption. But when it is alleged that a donee has exerted undue influence over a testator when he made his will, the law of probate does not raise such a presumption. Instead, the person attacking the will always has the onus of proving the existence of the undue influence. This distinction was recently recognized and affirmed by the Ontario Court of Appeal.[17]
I agree with Justice Dunphy that the role of a court of probate is inquisitorial and that the court is entitled to construe a will in order to ascertain whether the documents presented constitute the testator’s last will. The court determines whether a document is testamentary by asking whether “it was the testator’s intention that the gifts made by it should be dependent on his or her death”.[18] Clearly, if the court determines, upon construction of the document, that the maker of it intended the gifts to take effect before or after her death, it is not testamentary and cannot be probated.[19] The court will also ensure that the document was executed and attested in accordance with the statutory formalities and remains unrevoked, that the testator had capacity and was not subjected to undue influence, and that the will was unconditional.
Thus the jurisdiction of the court of probate to construe a document is limited to determining whether it is testamentary in nature. The court cannot go beyond that and venture into the jurisdiction of the court of construction. It is, of course, true that the Superior Court now exercises both the probate and construction jurisdictions. But since the rules for the two differ, they should not be exercised concurrently, save in very exceptional circumstances.[20] Thus, the court of probate should complete its work and thereafter the court of construction can construe the will if necessary.
In my respectful opinion therefore Justice Dunphy exceeded his jurisdiction when he concluded that the Primary Wills were invalid on their face because they gave power to the estate trustees to determine that probate was not required for certain assets.
There is another point to consider as well. Testators have employed various powers of appointment in their wills for a long time and their validity was not questioned until the 20th century, when dicta in a number of cases expressed the view that it is impermissible to delegate your testamentary power. However, that view has been discredited and in Re Nicholls[21] Krever J.A., who delivered the judgment of the Court of Appeal, confirmed that the use of powers of appointment in wills is valid.
In a recent blog, I wrote about delegating one’s testamentary power and went on to explain that a testator can also name persons in his will who can appoint the executors of the will and the trustees of a testamentary trust or their replacements.[22] I noted that this ability to delegate the power to appoint executors is quite old and one that was it was recognized by the Ecclesiastical Courts that preceded probate courts and never questioned by them.
That being so, why should giving a power to estate trustees to determine whether certain assets do or do not require the imprimatur of a court of probate be disallowed? Arguably it is also a delegation of one’s testamentary power. It is clear that the Milnes were disposing of their property, so their wills were testamentary. Only they needed the intervention of their estate trustees to determine whether probate was necessary for certain assets. In my respectful opinion that does not offend any principle of probate law. Moreover, since it is a device that can enable estates to avoid having to pay estate administration tax when that is unnecessary, the law should facilitate the device, rather than hinder it.
—
[1] 2018 ONSC 4174.
[2] Emphasis in para. 2 of the Reasons for Judgment.
[3] Ibid., para. 14.
[4] R.S.O. 1990, c. 26, s. 1(1).
[5] R.S.O. 1990, c. E.22, emphasis supplied.
[6] See Albert H. Oosterhoff, “Locus of Title in an Unadministered Estate and the Law of Assent” (2018), 48 Adv. Q. 41, at 56-64 (§2.7 and Excursus).
[7] Milne, supra, para. 15.
[8] Ibid., para. 16.
[9] Ibid. para. 23.
[10] Cf. Hebr 9:17.
[11] I.e., with the intention of making a will. See Williams on Wills, 10th ed. by Francis Barlow, Richard Wallington, Susannah L. Meadway, and James MacDougald, assisted by Charlotte Kynaston (London: LexisNexis, 2014), §1.2
[12] Ram v. Prasad (1999), 28 E.T.R. (2d) 140 (B.C.C.A.), affirming (1998), 23 E.T.R. (2d) 296 (B.C.S.C.); Prouse v. Scheuerman, 2001 BCCA 100, 197 D.L.R. (4th) 732.
[13] See the definition of “will” in s. 1(1) of the Succession Law Reform Act, supra.
[14] Brownrigg v. Pike (1882), 7 P.D. 61.
[15] Albert H. Oosterhoff. “The Discrete Functions of Courts of Probate and Construction” (2017), 46 Adv. Q. 316 (“Oosterhoff, Discrete Functions”).
[16] Ibid., §§2.2 and 4 (and Excursus), and passim.
[17] In Seguin v. Pearson, 2018 ONCA 355, paras. 10, 11.
[18] Macdonell, Sheard and Hull on Probate Practice, 5th ed. by Ian M. Hull and Suzanna Popovic-Montag (Toronto: Thomson Reuters/Carswell 2016), p. 300, citing, inter alia, Re Pfrimmer, 1936 CarswellMan 22, [1936] 2 D.L.R. 1 W.W.R. 609 (C.A.).
[19] See, e.g., Norman Estate v. Watch Tower Bible and Tract Society of Canada, 2014 BCCA 277, 99 E.T.R. (3d) 1; Goetz v. Goetz, 2014 ONSC 729, 99 E.T.R. (3d) 167.
[20] See Re Ali Estate, 2011 BCSC 537, 69 E.T.R. (3d) 303, paras. 43-47; Hon. Maurice Cullity. “Rectification of Wills – A Comment on the Robinson Case”, (2012), 31 E.T.P.J. 127 at 141-42; Oosterhoff, Discrete Functions, supra, §5.6
[21] (1987), 57 O.R. (2d) 763, 34 D.L.R. (4th) 32 (C.A.)
[22] “Delegating the Power to Appoint Executors”. http://welpartners.com/blog/2018/08/delegating-the-power-to-appoint-executors/. Posted 7 August 2018; “Delegating the Power to Appoint Executors – Update”. http://welpartners.com/blog/2018/08/delegating-the-power-to-appoint-executors-update/. Posted 26 August 2018.
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