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It's Not Over Until the Three Judges Sing

Divisional Court says Wills are not Trusts

February 2019

The Ontario Superior Court of Justice decision in Milne Estate (Re), 2018 ONSC 4174, alarmed the Estate Bar and left people wondering whether they had to put on their running shoes and scurry to their lawyer's office to redraft what they once believed to be a valid will. Fortunately, the apprehension can be put to rest, as this decision was successfully appealed at the Divisional Court level, allowing people to delete from their calendars “see lawyer re: redraft will”.

The Facts

John Milne and Sheila Milne (the “Milnes”) died on October 2, 2017, leaving identical Primary Wills (disposes of property where probate is required) and Secondary Wills and named their daughter, their accountant and their solicitor as executors. The Milnes, under the direction of their lawyer, gave their executors the power to determine which assets fell under the Primary Wills and which under the Secondary Wills. More specifically, their Wills contained the following basket clause:

THIS IS THE PRIMARY WILL/SECONDARY WILL of me....with respect to the disposition of all property owned by me at the time of my death EXCEPT:

(f) any other assets for which my Trustees determine a grant of authority by a court of competent jurisdiction is not required for the transfer of realization thereof
.....

The Milnes' Primary Wills were submitted to the Superior Court along with applications for a Certificate of Appointment of Estate Trustee with a Will Limited to the Assets in the Will.

Unexpectedly the Application Judge held that the Primary Wills were invalid and asserted that a will is a trust, therefore the three certainties – certainty of intention to create a trust, certainty as to the subject-matter of the trust or property committed to the trust, and certainty as to the objects of the trust or the purposes, must be present. More specifically, the Primary Wills were invalid because there was uncertainty as to the subject-matter of the trust given the set of assets in clause (f), which could not be objectively ascertained.

The executors appealed this decision, requesting that the Order be set aside and that they be granted the Certificates of Estate Trustee.

...a will is NOT a trust and to find otherwise is an error of law.

Divisional Court

The Divisional Court ruled that a will is NOT a trust and to find otherwise is an error of law. A will is plainly defined in the Succession Law Reform Act (SLRA), and nowhere does it characterize it as a trust. Further, the nature of a beneficiary under a will confirms that a will is not a trust, as division between legal and beneficial rights is not an automatic conception of a will. Additionally, even though section 2 (1) of the SLRA states that the deceased person's property is vested in the personal representative “as trustee”, there remains a distinction between trustees and executors and only their liabilities are closely related.

The Divisional Court also reasoned that if in fact a will is a trust thus requiring the certainty of the subject-matters, clause (f) does not detract from meeting this certainty given that there is an objective basis upon which the property can be identified. Categorically, executors need only ascertain whether an asset requires a Certificate of Appointment for its administration. If so, then it falls within the Primary Will. If one is not required, then it forms part of the Secondary Will.

Conclusion

The use of Primary and Secondary Wills has long been used for tax planning, as it can save the estate a significant sum in estate administration taxes. The “basket clause” at the centre of the judiciary ring for the administration of the Milnes' estate is also not a new creation and has been used for at least twenty years.

While this case will give the Estate Bar and their clients some comfort in knowing that similarly-worded basket clauses could be enforceable, and that an apparent legal error was corrected, it underscores the relative complexity in the industry and the need for clients to obtain legal advice to effectively ensure that their wishes after they pass away are followed. It also emphasizes the need for estate litigators to be on their toes and advise clients that despite the most well-intentioned language in a Will, nothing is as straightforward as it seems.


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