Revocation Clause and Beneficiary Designations – Update
1. Introduction
In January 2022 I posted a blog on the decision at first instance in Alger v Crumb.[1] I am delighted that the Ontario Court of Appeal has now affirmed that decision,[2] and so it behoves me to give an update of my earlier blog.
2. Facts
In 2019 the testator made beneficiary designations that directed payment of funds in her RRIF and TFSA accounts to each of her children, Sherri, Teresa, Robert, and Karen in equal shares. Thereafter, on the same day, she signed her Will. It contained the following revocation clause:
I HEREBY REVOKE all Wills and Testamentary dispositions of every nature and kind whatsoever made by me heretofore made [sic].[3]
She named Robert and Karen her executors (the ‘Executors’) and left $20,000 bequests to each of Sherri and Teresa and the residue equally to Robert and Karen. The testator died in 2020.
Sherri and Teresa (the ‘Respondents’) brought an application for an order directing the Executors to pay them the amounts to which they were entitled under the beneficiary designations. However, the Executors took the position that the revocation clause in the Will revoked the designations. If that was so, the funds in the plans would fall into the residue and would redound to the benefit of the Executors. Thus, the issue was whether the phrase ‘and Testamentary dispositions’ in the revocation clause had the effect of revoking the beneficiary designations.
Justice Verner considered sections 50-52 of the Succession Law Reform Act,[4] as well as the following two cases, Laczova Estate v Madonna House,[5] and Ashton Estate v South Muskoka Memorial Hospital.[6] She decided not to follow Ashton Estate because it was plainly wrong. I shall not discuss her Honour’s reasons further since I did so earlier. In any event, they are covered in detail in the reasons of the Court of Appeal.
3. Analysis and Judgment
Justice Feldman wrote the Court of Appeal’s reasons for judgment, while Zarnett and Copeland JJA concurred. Her Honour began by setting out the relevant provisions of the SLRA. She noted that under section 51(1) a participant[7] may designate a beneficiary in one of two ways: (1) by signed instrument, or (2) by will. However, section 51(2) provides that if the designation is made by will, it is effective only ‘if it relates expressly to a plan, either generally or specifically’. Section 52 then goes on to deal with revocations of designations. These can also be made either by signed instrument or by will. However, section 52(1) provides that 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 significant, as her Honour pointed out, that while section 51(2) requires that the designation by will must relate expressly to a plan, section 52(1) requires that a revocation in a will relate expressly to the designation.[8]
Her Honour then discussed Laczova. The will in that case referred to certain plans. The participant in that case had made beneficiary designations under the plans. However, the court found that there was no ‘designation’ of anyone as a beneficiary in the will, as required by sections 51(2) and 52(2). Further, the court rejected the argument that the scheme of the will impliedly revoked the original designations by instrument because section 52(1) requires that a designation by will must relate ‘expressly to the designation, either generally or specifically’ and the will in that case did not do so.
Justice Feldman then confirmed, by reference to MacInnes v MacInnes[9] and Amherst Crane Rentals Ltd v Perring,[10] that a designation of beneficiary is a ‘testamentary disposition’, and thus the designations of beneficiaries of the two plans fell under the general revocation clause in the Will.
However, the question remained whether the general revocation clause had the effect of revoking the designations. Her Honour concluded that it did not because the revocation clause did not relate ‘expressly’ to the designations in the sense that it refers specifically, explicitly, or deliberately to them. Thus the revocation did not comply with section 52(1) of the SLRA and therefore did not revoke the designations.
Finally, her Honour agreed with the finding of Justice Verner that the interpretation of the general revocation clause in Ashton Estate should not be followed, since the judge in that case did not consider the requirement that a revocation clause must relate expressly to the designation, whether generally or specifically.
The appeal thus effectively overrules Ashton Estate and that is a welcome result. In my earlier blog I suggested that for the time being we should modify the general revocation clauses in wills by stating expressly that the testator is not revoking beneficiary designations previously made. Although this now no longer seems necessary, it cannot hurt.
In the earlier blog I also recommended that we should amend the SLRA to include certain definitions contained in section 1(1) of the Wills, Estates and Succession Act.[11] This Act recognizes that a beneficiary designation is a ‘testamentary instrument’ but excludes it from the definition of ‘will’.
—
[1] 2021 ONSC 6076. See https://welpartners.com/blog/2022/01/effect-of-a-wills-revocation-clause-on-beneficiary-designations/.
[2] Alger v Crumb, 2023 ONCA 209.
[3] The duplicate language in the clause was not an issue in the case.
[4] RSO 1990, c S.26 (‘SLRA’).
[5] 2001 CarswellOnt 4438, 207 DLR 4th 341 (CA).
[6] 2008 CarswellOnt 2592, 40 ETR 3d 153 (SCJ).
[7] Section 50 defines ‘participant’ as ‘a person who is entitled to designate another person to receive a benefit payable under a plan on the participant’s death’.
[8] Emphasis in the original.
[9] [1935] SCR 200.
[10] (2001) 241 DLR 4th 176 (Ont CA), leave to appeal to the SCC refused [2004] SCCA No 430.
[11] SBC 2009, c 13.
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Written by: Albert Oosterhoff
Posted on: July 31, 2023
Categories: Commentary, WEL Newsletter
1. Introduction
In January 2022 I posted a blog on the decision at first instance in Alger v Crumb.[1] I am delighted that the Ontario Court of Appeal has now affirmed that decision,[2] and so it behoves me to give an update of my earlier blog.
2. Facts
In 2019 the testator made beneficiary designations that directed payment of funds in her RRIF and TFSA accounts to each of her children, Sherri, Teresa, Robert, and Karen in equal shares. Thereafter, on the same day, she signed her Will. It contained the following revocation clause:
I HEREBY REVOKE all Wills and Testamentary dispositions of every nature and kind whatsoever made by me heretofore made [sic].[3]
She named Robert and Karen her executors (the ‘Executors’) and left $20,000 bequests to each of Sherri and Teresa and the residue equally to Robert and Karen. The testator died in 2020.
Sherri and Teresa (the ‘Respondents’) brought an application for an order directing the Executors to pay them the amounts to which they were entitled under the beneficiary designations. However, the Executors took the position that the revocation clause in the Will revoked the designations. If that was so, the funds in the plans would fall into the residue and would redound to the benefit of the Executors. Thus, the issue was whether the phrase ‘and Testamentary dispositions’ in the revocation clause had the effect of revoking the beneficiary designations.
Justice Verner considered sections 50-52 of the Succession Law Reform Act,[4] as well as the following two cases, Laczova Estate v Madonna House,[5] and Ashton Estate v South Muskoka Memorial Hospital.[6] She decided not to follow Ashton Estate because it was plainly wrong. I shall not discuss her Honour’s reasons further since I did so earlier. In any event, they are covered in detail in the reasons of the Court of Appeal.
3. Analysis and Judgment
Justice Feldman wrote the Court of Appeal’s reasons for judgment, while Zarnett and Copeland JJA concurred. Her Honour began by setting out the relevant provisions of the SLRA. She noted that under section 51(1) a participant[7] may designate a beneficiary in one of two ways: (1) by signed instrument, or (2) by will. However, section 51(2) provides that if the designation is made by will, it is effective only ‘if it relates expressly to a plan, either generally or specifically’. Section 52 then goes on to deal with revocations of designations. These can also be made either by signed instrument or by will. However, section 52(1) provides that 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 significant, as her Honour pointed out, that while section 51(2) requires that the designation by will must relate expressly to a plan, section 52(1) requires that a revocation in a will relate expressly to the designation.[8]
Her Honour then discussed Laczova. The will in that case referred to certain plans. The participant in that case had made beneficiary designations under the plans. However, the court found that there was no ‘designation’ of anyone as a beneficiary in the will, as required by sections 51(2) and 52(2). Further, the court rejected the argument that the scheme of the will impliedly revoked the original designations by instrument because section 52(1) requires that a designation by will must relate ‘expressly to the designation, either generally or specifically’ and the will in that case did not do so.
Justice Feldman then confirmed, by reference to MacInnes v MacInnes[9] and Amherst Crane Rentals Ltd v Perring,[10] that a designation of beneficiary is a ‘testamentary disposition’, and thus the designations of beneficiaries of the two plans fell under the general revocation clause in the Will.
However, the question remained whether the general revocation clause had the effect of revoking the designations. Her Honour concluded that it did not because the revocation clause did not relate ‘expressly’ to the designations in the sense that it refers specifically, explicitly, or deliberately to them. Thus the revocation did not comply with section 52(1) of the SLRA and therefore did not revoke the designations.
Finally, her Honour agreed with the finding of Justice Verner that the interpretation of the general revocation clause in Ashton Estate should not be followed, since the judge in that case did not consider the requirement that a revocation clause must relate expressly to the designation, whether generally or specifically.
The appeal thus effectively overrules Ashton Estate and that is a welcome result. In my earlier blog I suggested that for the time being we should modify the general revocation clauses in wills by stating expressly that the testator is not revoking beneficiary designations previously made. Although this now no longer seems necessary, it cannot hurt.
In the earlier blog I also recommended that we should amend the SLRA to include certain definitions contained in section 1(1) of the Wills, Estates and Succession Act.[11] This Act recognizes that a beneficiary designation is a ‘testamentary instrument’ but excludes it from the definition of ‘will’.
—
[1] 2021 ONSC 6076. See https://welpartners.com/blog/2022/01/effect-of-a-wills-revocation-clause-on-beneficiary-designations/.
[2] Alger v Crumb, 2023 ONCA 209.
[3] The duplicate language in the clause was not an issue in the case.
[4] RSO 1990, c S.26 (‘SLRA’).
[5] 2001 CarswellOnt 4438, 207 DLR 4th 341 (CA).
[6] 2008 CarswellOnt 2592, 40 ETR 3d 153 (SCJ).
[7] Section 50 defines ‘participant’ as ‘a person who is entitled to designate another person to receive a benefit payable under a plan on the participant’s death’.
[8] Emphasis in the original.
[9] [1935] SCR 200.
[10] (2001) 241 DLR 4th 176 (Ont CA), leave to appeal to the SCC refused [2004] SCCA No 430.
[11] SBC 2009, c 13.
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