WILLS VARIATION ACT: CONSIDERATION OF BENEFITS PASSING OUTSIDE ESTATE.

The Wills Variation Act is the British Columbia statute which permits an eligible claimant to contest a will.  The class of claimants eligible to bring a  Wills Variation Act claim includes any spouse, common-law spouse, same-sex spouse and any child of the Deceased, whether natural or adopted. 

The Wills Variation Act permits a court to provide to the claimant only from those assets which would otherwise pass according to the terms of the Deceased’s last will, i.e. from the Deceased’s estate. 

S. 2 of the Wills Variation Act reads, in part, as follows:

2. (1) …, if a testator dies leaving a will which does not, in the court's opinion, make adequate provision for the proper maintenance and support of the testator's wife, husband or children, the court may, … order … provision that it thinks adequate, just and equitable in the circumstances be made … for the wife, husband or children.

There may be, however, have been other lifetime benefits to the claimant for example education or interest free loans to a child.  There may also be assets passing outside of the estate--for example insurance proceeds, benefits under pension plans or assets held in joint tenancy.  Benefits and assets such as these, passing outside of the will, cannot be redistributed by the court under the terms of Wills Variation Act.

Sometimes the benefits passing outside of the Deceased’s estate are greater than those assets passing under the terms of the will.  This may result deliberately as a result of estate planning (for example, to minimize probate fees or to avoid a Wills Variation Act challenge) In other cases, however, these benefits may an unplanned consequence–for example accidental death benefits arising under an insurance policy in the case of a fatal accident.

Although benefits passing outside of the will cannot be redirected under the provisions of the Wills Variation Act, the question remains whether the courts can legitimately take such benefits into account in determining what provision is “adequate, just and equitable in the circumstances” under s. 2 of the Wills Variation Act.  The short answer is “Yes”.

In the last few years years it has become clear that our courts, in determining the appropriate provision under the Wills Variation Act, will maintain a broad view in determining what is an equitable provision to the claimant.  The courts will have regard to previous life time gifts by the Deceased and the value of all benefits arising as a result of the Deceased’s death, whether or not arising directly under the terms of the Deceased’s last will.

In Ryan v Delahaye Estate 2003 BCSC 1081, J. Daphne Smith (as she then was) concluded that inter vivos dispositions and assets passing by right of survivorship pass outside the estate, and are therefore not subject to a claim under the Wills Variation Act.  Nevertheless she ruled that the court can consider them when assessing, from the perspective of a judicious person, in the circumstances, whether a parent has met his or her moral obligations to an adult child.

In this case Smith, J. considered that the Deceased parents had paid for their son’s  education and made interest-free loans to him.  The parents had not provided similar benefits to their daughter.  Smith J. found that the 80/20 split in the will (lion’s share to the son) did not provide proper maintenance and support for the daughter.   She ruled that an adequate, just and equitable distribution would give the daughter an equal share of the residue of the estate.  Smith J. accordingly varied the will to divide the residue equally between the two children.

In Inch v. Stead Estate 2007 BCSC 1249, 36 E.T.R. (3d) 79. Mr. Justice Wilson considered the question of whether the court could consider property passing outside of the estate.  In this case, the property in question was a term deposit in joint names with a right of survivorship. 

 “ 69 … It thus appears that, although transfers passing outside of the Will are not part of the estate, the effect of such gifts can be considered in determining to what extent, if any, the court should vary the distribution under the Will.

70 …. I thus conclude that, although inter vivos dispositions, and assets passing as a result of a right of survivorship pass outside the estate, and are thus not subject to a claim under the Wills Variation Act, the court can consider them when assessing, from the perspective of a judicious person, in the circumstances, whether a parent has met her moral obligations to an adult child.”  (Emphasis added)

This reasoning was applied in the later case of Viberg v. Viberg Estate, [2009] B.C.J. No. 38, 2009 BCSC 27, 44 E.T.R. (3d) 255,

In Viberg v. Viberg Estate , the Deceased had executed his will 26 years before his death.  At that time he was married with young children.  He and his wife separated in 1992 but remained on good terms, until his sudden death.

Upon the Deceased’s death, his entire estate passed under the will to his estranged wife.  She also received a CPP pension and insurance benefits of $382,500 outside of the estate

The court specifically followed the reasoning of the Inch decision and held that because a substantial amount of life insurance was received by the wife on her estranged husband's death, it should be considered when assessing, from the perspective of a judicious parent, whether the deceased had met his moral obligations to his adult children.

The two adult children argued that they should receive $100,000 each out of the estate of their late father. At paragraph 45 of the reasons for judgment, Justice Chamberlist stated in response “ that submission would put the insurance proceeds that passed outside of the estate on the same footing as assets that passed within the estate.”

His Lordship continued “as I understand the law, the insurance proceeds and CPP benefits that passed should only be considered when assessing what (the deceased), as a judicious person, would have considered adequate, just and equitable for his adult children”.

The court divided the estate on the basis of that the estranged wife received an additional $149,000 from the estate, with the balance of $168,000 being equally divided among the children.

The net effect of the decision was, that even though the court took into account the $382,000 of insurance proceeds paid to the separated wife outside of the estate, she was still awarded just less than one half of the residue of the estate, so as to receive a total of $531,000.

Conclusion 

It seems to be well settled that,  in considering Wills Variation Act claims, our courts will consider both inter vivos gifts and benefits arising outside of the Deceased’s will.  The court will consider these other benefits in determining to what extent, if any, the court should vary the distribution of assets passing under the will.

Although the courts will consider gifts passing outside of the estate, there is still a very wide discretion as to what effect that ought to have.  In other words just because one heir has received $ 100,000 outside of the estate does not mean that their estate share ought to be diminished by that amount.