Will Drafting – Will DIY 5/7

For a will to be valid, it must clearly show the testator’s intention to make a gift. Without this, the gift cannot take effect. As we discussed earlier, the testator must fully understand what they are doing and must not be under duress or influence when writing the will.

The second essential element, “certainty”, can be divided into two parts:

1. The recipient of the gift must be clearly identified.
2. The property being gifted must be specifically defined.

For example, if a testatrix writes in her will, “I leave my antique clock to my nephew Bob,” but what happens if:

• She has two nephews, both named Bob, OR
• She has a nephew named Bob, and her husband also has a nephew named Bob?

There is also the issue of certainty with the gift itself. If the will states, “I give some of my valuable antique stamps to my nephew,” this is problematic because it’s unclear which stamps the nephew is entitled to.

Another example involves a testator who collects vintage cars. He buys, restores, drives, and then sells them, repeatedly. If he wants to leave a vintage car to his nephew in his will, the wording he chooses could affect whether his nephew actually receives one:

• “I give my car to my nephew” means the car he owns at the time the will is made.
• “I give the car to my nephew” means the car he owns at the time of his death.

It is recommended that the will clearly state the estate trustee’s authority to:

• Pay debts
• Finalize sales
• Manage real estate
• Sell all assets
• Make appropriate investments, such as investing in GICs, etc.

Why is it important to “clearly state” these powers? Because if not expressly provided, the trustee will need to seek approval from either:

1. All beneficiaries, or
2. The court if any beneficiary is a minor.

To explain a “conditional bequest,” we must first introduce the concept of a “trust.” Here, we can only briefly touch on it, but we will dedicate an entire series of blogs to thoroughly explain trusts.

Let’s look at the following will clause to illustrate a “conditional bequest”:

1. “The Trust Fund shall be held in trust for my children who reach the age of 25, and if more than one, in equal shares absolutely.”
2. “If any of my children die before me or before reaching a vested interest, leaving children who reach the age of 25, those children shall take their parent’s share of the Trust Fund in equal shares absolutely.”

This clause creates a contingent trust for the testator’s children:

1. Their entitlement is conditional on reaching the age of 25.
2. If they do not reach that age, their estates receive nothing, but then a substitutional trust is created for testator’s grandchildren, also contingent on them reaching the age of 25.

Why is the will structured this way?

Contingent trusts are used when the testator does not want children or other beneficiaries to receive large sums of money at too young an age.

For charitable bequests, the testator should consider the following:

• Confirm the charity’s name by contacting the charity directly, as charities’ names can often change.
• If tax benefits are a motivation, ensure the recipient is a registered charity with a valid RR account for tax purposes.
• If executors are given the discretion to choose the charity, ensure the chosen organization’s purpose is “charitable.”
• Verify that the charity can legally receive non-cash gifts, such as property, i.e. whether this charity can be a legal transferee of a house.
• Clarify the purpose of the bequest, whether it is an outright gift, a perpetual donation, or for a specified purpose.

Plan for contingencies if the charity no longer exists or changes its mission:

• Situation 1 – Ademption:

  • If a specific bequest is no longer part of the estate at death, the gift fails, and the beneficiary does not receive it.

• Situation 2 – Anti-Ademption:

  • Rules that dictate how a bequest will be fulfilled through a ‘substitute gift’ when the specific property is no longer part of the estate at the time of the testator’s death.

This refers to situations where the intended recipient of a bequest is no longer alive or the specific item no longer exists when the testator passes away.

1. What happens if the intended recipient has already passed away?
2. What happens if the intended item is no longer available?

People can pass away “out of order,” meaning the testator must plan for contingencies if the beneficiary dies before the estate is distributed.

s.23 and s.31 of the Succession Law Reform Act (SLRA) provide legal guidance for these two scenarios:

Scenario 1

If the intended recipient has passed away, s.23 states that “the gift lapses.” This means if the bequest or devise lapses and no alternative instructions are provided, the gift falls into the residue of the estate. For example, if I bequeath $1 million in gold bars to my nephew, but my nephew dies before me, those gold bars will be added to the residual estate.

However, class gifts are an exception to the lapse rule. This means that if one or more members of the class die before the testator, the gift passes to the remaining class members.
For example, if I bequeath $1 million gold bars to be shared equally among my four nephews, and one nephew dies before me, the remaining nephews will equally divide the $1 million gold bars. 

Scenario 2

s.31 of the SLRA states that “the issue (meaning “decendant”) of the deceased recipient are entitled to the gift.”

IF

• A bequest or devise to a child, grandchild, or sibling fails due to the beneficiary’s death, AND
• The deceased beneficiary leaves behind a spouse or surviving descendants,

THEN

• The bequest or devise passes to their spouse or issue as if under intestacy rules, but the surviving spouse does not receive a preferential share.

Examples:

1. Intended beneficiary has a spouse but no children:

   • For instance, the will makes a $90,000 gift to the testator’s son, but the son predeceases the testator, leaving behind a surviving spouse but no children.
     In this case, the son’s widow will receive the $90,000 bequest.

2. Intended beneficiary has a spouse and children:

   • If the will makes a $90,000 gift to the testator’s son, but the son dies before the testator, leaving behind a spouse and three children:

     • The wife will receive 1/3 of the $90,000

     • The remaining $60,000 will be divided equally among the three children (each receiving $20,000).

However, if the will shows a contrary intention, for example when it says: 

“To my son, if he survives me, the sum of $90,000,”

then the anti-lapse rule will not apply, and the gift will lapse entirely.

Mirror Wills

A Mirror Will is simple and common in most families. For example, a loving couple each writes their own will with the following terms:

• “I leave everything to my wife, and if she predeceases me, to our children.”
• “I leave everything to my husband, and if he predeceases me, to our children.”

This straightforward approach works well for many typical family situations.

Mutual Wills

Mutual wills are a type of contract (or more precisely, a covenant) between two parties. The purpose of a mutual will is to restrict the otherwise broad testamentary freedom that individuals enjoy under Canadian law. In essence, it binds the parties to a shared agreement about the distribution of their estates, preventing one party from changing their will after the other has passed away. To explain Mutual Wills, let’s use a story:

A woman has a daughter from a previous relationship, and she is about to marry a man. After the marriage, she wants her estate to go to her husband when she dies. Then, when her husband passes, she wants the estate to eventually go to her daughter.

However, she’s concerned that after her death, her husband might change his Will and leave her daughter with nothing, due to the “testamentary freedom” in Canadian law.

To prevent this, the couple agrees to Mutual Wills, with a provision stating:

• “All my estate to my husband, but if he predeceases me, to my daughter.”
• “All my estate to my wife, but if she predeceases me, to her daughter.”

Her worry is that if she dies first, her surviving spouse might remarry or lead a different life and decide to distribute the property in a completely different way. This is where the Mutual Wills Doctrine comes into play. It ensures that once two parties make their wills together, neither can change their will after the other’s death. Essentially the effect of the doctrine of mutual wills is not to invalidate the new will that the later-deceased person makes, instead the new Will would be frustrated in practice.

Under this doctrine, when the woman dies, a constructive trust arises, as the woman has already carried out her side of the bargain, so it then would be wrong and unconscious to let the survivor renege on their side.

It’s also worth to note that, in the absence of a written agreement of mutual wills, the courts are unlikely to establish an oral contract to make mutual wills, although some cases have arisen based on surrounding circumstances, per Rammage v Estate of Roussel [2016]. 

When a couple is making mirror wills, they need to be cautious of cash legacy distribution from the estate after the death of the last partner. 

It could be a problem when the death of two people are simultaneous death. The mirror wills could lead to cash being paid from each estate, for example when both the husband and wife’s wills say:

• I leave $10k to DogHome

But if the husband and wife died at the same time due to a car accident, would the charity get $20k?

The fix to this situation is to have a a proviso in the will that says:

• If the husband or wife die within 30 days of one another, the legacy payable out of each estate should be halved (1/2). 

A testator should canvas the possibility that all of the beneficiaries will die before the entire estate has been distributed. This can happen in a number of situations: 

1. There is a common disaster involving all of the members of the “nuclear” family. 
2. There is a delayed distribution to a child or children, and no child attains the age specified for the final capital distribution.
3. The beneficiary under a life interest outlives everyone else. 

The testator should therefore be aware of the possibility of the following situations:

• A failure to address this scenario could, for example, result in certain relatives from whom the client was estranged at the time of the client’s death inheriting the estate under the intestate succession rules. This rule will kick in if “everyone on the will dies before the testator”, so the ultimate distribution scheme could be expressed in the following terms:
  • At the date of death of the last to die of my spouse, my issue, and me (the “Final Distribution Date”), any portion of my estate remaining undisposed of in accordance with the foregoing provisions (the “Remainder Estate”) shall be distributed to those persons who would have been entitled thereto, and in the same proportions as they would have been respectively so entitled, if I had died on the Final Distribution Date, intestate, unmarried, and without debts, and my estate had consisted solely of the Remainder Estate.