Estate Planning – Consequences of Faulty Estate Planning

Consequences of Faulty Estate Planning

Wills are intricate instruments where details matter.  The preparation of a Will requires care and diligence.  If improper care is taken, certain gifts may not be received by the person or entity that the Will-maker intended.  This article will canvas two areas where the gifts in a Will may not be distributed in accordance with the Will-makers wishes.

A gift could be deemed ineffective for many reasons including the beneficiary of a gift pre-deceasing the Will-maker or if the beneficiary mistakenly signs the Will as a witness to the Will.  British Columbia has enacted legislation found in s. 46 of the Wills Estates and Succession Act (“WESA”) to deal with these ineffective gifts.  A Will can provide for alternative beneficiaries to the gift, in which case, if the gift was deemed ineffective for any reason, the gift would go to that alternative beneficiary.  There is also a special rule if the ineffective gift was made to a special class of person.  The special class under the WESA consists of siblings of the Will-maker or descendants of the Will-maker.  In that scenario, the ineffective gift would go to that special class member’s descendants.  If there are no alternative beneficiaries mentioned and the gift is not to a special class of person, the ineffective gift will go to the surviving residuary beneficiaries in proportion to their interests.

Ademption is another consideration for the Will-maker.  Ademption arises when a “specific gift” is no longer part of the Will-makers estate or has been converted into something else.  This often happens when a Will-maker has gifted a car (or some other specific piece of property) to someone many years earlier but before the death of the Will-maker the car is sold to someone other than the person designated under the Will.  In that scenario, the gift under the Will would fail.  However, as stated in the seminal British Columbia authority on ademption, Trebett v Arlotti-Wood, 2004 BCCA 556, ademption will not occur where the specific property in question has been changed “in name or form only” so that it “exists as substantially the same thing, although in a different shape.”  What is considered a change “in name or form only” has been a litigious matter where answers vary considerably.

In regards to ademption, if the specific gift was sold by a nominee (attorney or representative) before the death of the Will-maker, the beneficiary of the gift is entitled to receive from the Will-maker’s estate an amount equivalent to the proceeds of the gift as if the will had contained a specific gift to the beneficiary of that amount.  In other words, the beneficiary will not receive the exact gift stipulated in the Will but will receive the cash proceeds of the sale of that specific gift.  This scenario is governed by s. 48 of the WESA.

“It has often been said that the other bank of the river Styx is lined with the shades of dissatisfied testators waiting to receive their judicial parsonages from those who have misconstrued their wills”