What Is an Express Trust?

What Is an Express Trust?

Chambers v Chambers 2012 BCSC 81 involves  litigation between a 90-year-old brother and his younger 79-year-old brother regarding the percentage of ownership in a house that the older brother  (A)  purchased so that the younger brother ( B)  could live in.

The house was purchased in 2005 by A with his own money.

The idea was that brother B would have a place to live until he died.

A  had initially told B that he would register the house in joints tenancy, but after meeting with a lawyer, he subsequently told B that he would give him 1% interest on title as a tenant in common, which he did.

In 2010 the house was sold over the objections of B who refused to sign the sale documents because he objected to receiving only 1% of the sale proceeds.

By agreement one half of the sale proceeds were held by a lawyer while B brought an application to court for a finding that 50% of the sale proceeds of the home were held in trust for him.

His application was dismissed and he was only entitled to 1%.

His first argument was that of  Express Trust, and this was dismissed on the basis of no evidence of such a trust:

 

An express trust requires a settlor, a beneficiary, a trust corpus, words of settlement, certainty of object and certainty of obligation.

In order for an express trust to arise there must be certainty of intention, subject matter and object. There must also be a transfer of property to the trustee

In order to create an express trust in circumstances such as these, the three requisite certainties must be present.

In Saugestad v. Saugestad, 2006 BCSC 1839, the Court said the following at para. 82:

The requirements for the creation of an express trust include the three certainties:

1) the language of the settlor must be imperative,

2) the subject matter or trust property must be certain,

3) and the objects of the trust must be certain

Precatory Words Are Not Binding In Wills and Trusts

wish-precatoryIn the law of wills and trusts, precatory words have been defined as words of wish, hope, desire or entreaty accompanying a gift, that the done will dispose of property in some particular way, which may show that a trust was intended.” [At para. 25.] Ladd v. Ladd (2002), 47 E.T.R. (2d) 251, 2002 CarswellOnt 3608 (Ont. S.C.J.).

There are many case examples where such words as “wish, desire, hope, ” are found to be precatory and thus legally non binding.

These words of expression only can be  juxtaposed against legally enforceable words such as “shall or must” and other mandatory words.

Rudaczyk Estate v. Ukrainian Evangelical Baptist Assn. of Eastern Canada (1989), 1989 CarswellOnt 534, 69 O.R. (2d) 613, 34 E.T.R. 231, Watt J. (Ont. H.C.) is a good example of this principle.

By her will dated September 28, 1981, the testatrix gave the residue of her estate to her trustees on trust to “pay or transfer” it to the Ukrainian Evangelical Baptist Association of Eastern Canada “for its own use absolutely”.

The will also gave to the trustees the various powers set out in a “Schedule Of Trustee’s Powers” which was initialed, attached to and expressly made part of the will.

By a “Memorandum To Trustee” which was signed by the testatrix in the presence of the same two witnesses as the witnesses to the will and which was dated September 28, 1981 the testatrix stated the following:

IT IS MY WISH that you set aside one-quarter of the residue of my estate for the benefit of my niece, [M.K. in the Ukraine] … and use this sum for the purchase and mailing of food, clothing, and other articles as my said niece, may request and you in your absolute discretion shall think fit.

The “Memorandum” was not referred to in the will. ( underlining added for emphasis)

The testatrix died in 1987 and letters probate were issued to the executors of her estate including both the will and the “Memorandum”.

The executors sought the opinion, advice or direction of the Court as to whether the memorandum was legally binding on the trustees or was merely precatory.

The preliminary issue arose as to the admissibility of the affidavit evidence of two persons which evidence related to the making of the will and the “Memorandum”.

Held:

(1) The affidavit evidence relating to the making of the will and memorandum was not admissible since it fell within the general exclusionary rule forbidding the introduction of direct extrinsic evidence of a testator’s actual intention and there was nothing which took the affidavit evidence out of the general rule.

(2) Although the “Memorandum” was executed in accordance with the requirements for making a will, it was to take effect after the testatrix’s death, and contained provisions relating to the disposition of the deceased’s property, its permissive language (particularly when contrasted with the imperative terms used in the will) and its existence as a separate document from the will indicated that it was merely precatory and not legally binding on the trustees

Must Have Legal Claim Before Death, Before It’s Fraudulent Conveyance

Legal Claim Before Death

Todays case discussion is Hossay v Newman 1998 BCJ 3289

The plaintiff was adult son of the testator.

The Testator placed his major assets in joint tenancy with one of defendants shortly before his death with result that assets passed to that defendant by operation of law and did not form part of testator’s estate .

The son sued to set aside the Joint tenancies on the basis they were Fraudulent conveyances meant to defeat his claim as a creditor under the Wills Variation act.

The court dismissed the claim.

Section 1 of Fraudulent Conveyance Act does not apply to claims that arise solely on death of debtor/testator but rather contemplates situation where the claimant had some legal or equitable claim against debtor during debtor’s life.

Where claim arises solely on death under Wills Variation Act, claimant does not come within “creditors or others” within meaning of s. 1 of Fraudulent Conveyance Act.

As the plaintiff’s claim under Wills Variation Act arose solely on testator’s death, s. 1 of Fraudulent Conveyance Act did not apply to the inter vivos transfer by testator to the defendants.

 

If there is no legal or equitable claim which pre-exists the death of the testator, then the claim is solely one arising on death under the Wills Variation Act. Without any prior foundation, the claimant does not have the status of creditor or others within the meaning of s. 1 of the Fraudulent Conveyance Act.

Ademption – Testator Must Own the Specific Gift At Death Or the Gift Fails

The law relating to ademption applies when a particular item in a will is described with such specificity that it is clearly distinguished from other property owned by the deceased. If that specific property is not found among the testator’s assets after death, the gift is said to have adeemed-the gift fails and the technical term for the failure of the gift in such circumstances is ademption. The gift is said to have adeemed.

The rule applies whether the testator ever really did own the property or not .

For example testators often believe that they are the owners of property and after death, it is learned that the property was actually in another name such as a corporate entity or in joint tenancy.

The other common example that disinherited.com has witnessed is simply caused by  poor draftsmanship in a will.

The will often specifies a specific civic address to be left to a beneficiary,  when upon death it is learned that the property had been sold during the lifetime of the testator, who instead died owning another parcel of property with a different civic address.

(The proper wills drafting should have been instead something like “any residence that I own at the time of my death I hereby bequeath to ?”

In both situations the gift of the property will have adeemed.

Whether or not a gift has actually adeemed can in certain circumstances, be very difficult to determine.

Here are two examples of such litigation-there are many:

RE DEARDEN ESTATE; SHOEMAKER et al. v. PITTMAN et al.

            1987 CarswellMan 131, 26 E.T.R. 111, 46 Man. R. (2d) 222

 

By his will, made in 1970, the testator gave his dry-cleaning and laundromat business and the land where it was carried on to his nephew, MSM, and he gave the residue of his estate to his sisters and brother.

In February 1986, the testator entered into a contract to sell the business along with the land. The completion date for the contract was August 30, 1986. The testator died in June 1986. The contract, which was never in fact completed, was subject to certain conditions. In particular, the vendor was to subdivide the property by August 1, 1986; all structures on the land were not to encroach on any adjoining property; and the purchaser had a right to rescind if the financial position of the business was worse than that disclosed in financial statements provided by the testator. These conditions were never satisfied since subdivision had not occurred as of the date of the deceased’s death or as of the completion date; the building in question did encroach on land owned by the municipality and an agreement to resolve this encroachment was never made with that municipality; and the financial statements provided by the testator were in fact inaccurate, showing grossly inflated amounts for income.

The executors of the testator’s estate applied for the directions of the Court.

The Court held that there was no ademption-the he specific gift of the dry-cleaning and laundromat business, and the land on which it was carried on, was not adeemed by the contract of sale made by the deceased.

The doctrine of conversion applies only to a contract that is enforceable by and against the testator.

The contract made by the testator was not in fact enforceable by or against him since it was subject to two true conditions precedent (the conditions relating to zoning and encroachment) that were never satisfied. In addition, the contract was subject to the condition relating to financial statements which was not satisfied and which, not having been waived by the purchaser, rendered the contract unenforceable against the purchaser.

 

RE CUDECK

               1977 CarswellOnt 387, 1 E.T.R. 17, 16 O.R. (2d) 337, 78 D.L.R. (3d) 250

   Ontario Supreme Court, Court of Appeal

 

The testator’s will directed his trustee to pay M “the proceeds of a Term Deposit of $28,000.00 principal plus interest, … said Term Deposit having been made on or about November 10th, 1973.” At the time he executed his will, the testator had a term deposit of $28,000 at his bank. The testator subsequently cashed his term deposit and deposited the proceeds in his bank account. Thereafter the testator periodically purchased new term deposits, including a term deposit of $40,000, with the proceeds of the original and subsequent term deposits. During the currency of the $40,000 term deposit, the testator executed a codicil which in effect altered the terms of the original legacy so as to read:

To deliver and pay my friend, [M], … the proceeds of a Term Deposit of $40,000, … said Term Deposit having been made on or about November 10th, 1973, or at any time thereafter. …

The following year, the term deposit for $40,000 matured and its proceeds were deposited in the testator’s account. Subsequently, using the term deposit proceeds, the testator purchased a further term deposit for $36,000 and cashed it for $36,258.90. The testator supplemented the $36,258.90 with personal funds and purchased 37 one-thousand-dollar bills, which he deposited in his safety deposit box. At the testator’s death these bills were found in his safety deposit box along with a handwritten note which indicated that in the event of the testator’s death M was to get the contents of the box as a bequest.

At trial, the trial Judge found that M was entitled as a legatee, under the testator’s will, to $36,000.

On appeal, held, the trial Judge’s order was varied to include the interest received from the last term deposit, with the result that M was entitled to be paid $36,258.90 out of the $37,000 found in the safety deposit box.

No ademption.

The legacy to M would have been lost if:

(i) the proceeds of the term deposit could not have been traced, or

(ii) the testator in cashing the deposits had clearly appropriated the proceeds to himself, in which case they would have been adeemed.

Though the note found in the testator’s safety deposit box was not itself given testamentary effect, it was used to trace and identify the proceeds given by the will and codicil.

Holograph Wills Not Valid In British Columbia (BC)

Holograph willsPlease note that since the date of this original blog, the curative provisions of s 58 of WESA may have altered the law relating to the topic of holograph wills.

Holograph wills are ones that is entirely written and signed by the testator, but does not have the witness attestation that is required in British Columbia in order to make a will valid. ( Two witnesses and the testator sign the will,  all in the presence of each other, is required in British Columbia)

Many non lawyers have heard the story of the Alberta farmer pinned under his tractor and dying, who wrote on the dust of the tractor’s fender “everything to mom”.

The holograph will/fender was not dated, but the fender was admitted into court as the last valid holograph will of the deceased, and everything went to mom..

That would not be a valid will in British Columbia for a few reasons, but most primarily, the absence of the two witnesses.

The holograph will must still have the necessary animus testandi, meaning the deliberate intention to dispose of property after death.

There cannot be any question of this testamentary intention as there is no requirement that the holograph will identify itself as a will.

There are examples where letters have been held sufficient to be admitted to probate as holograph wills.

The decision Re Neilson Estate (1989) 96 NBR (2d) 2 involved a deceased who had delivered three pages of handwritten instructions to her lawyer, and then signed the last page with her first name, and  put the pages in an envelope with her full name on the outside.

The court admitted these instructions as a valid holograph will .

disinherited.com is strongly supportive of the existing law in  British Columbia requiring two witnesses to all be present, and both watch the testator sign his or her name, and then the testator watching the witnesses attest their names, all at the same time.

There is already far too much  abuse in the wills and estates arena, and the absence of two witnesses can only lead to further wills and financial  abuse, particularly of the elderly.

Purported Gift Set Aside – Resulting Trust Found

NO gift wrappedPurported Gift Set Aside

Resulting Trust Found

Sutherland, Committee of Fountain v Dorland and Rendell 2012 BCSC 615 involves a plaintiff, as committee of her deceased mother’s estate, seeking to recover funds transferred by her mother in the last years of her life to the defendants, the plaintiff’s sister and nephew.

The plaintiff alleged that the deceased lacked mental capacity when she purportedly signed 35 cheques amounting to more than $153,000.

The deceased died shortly thereafter at the age of 90 years.

The plaintiff  also alleged that there was no consideration for any of the cheques the defendants  received, and consequently , the monies were impressed by a resulting trust in favor of the deceased estate.

The defendants asserted that the monies were gifts, but were l;argely unable to explain why or much about why they were gifts, especially at a time when the defendants were financially in need.

The court awarded judgment for the plaintiff for the amount of $131,000, and allowed a claim of $29,000 for services rendered, finding that at the time the services were rendered, the deceased had capacity.
The Court reviewed the law of resulting trusts from the most recent Supreme Court of Canada case on the topic:

[62]    The first legal concept relevant to the analysis is that of the resulting trust. As explained by Rothstein J. in Pecore v. Pecore, 2007 SCC 17 at paragraph 20:

A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner…

The law presumes a resulting trust in certain situations. Again, as explained by Rothstein J. at paragraph 24 of Pecore:
The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended…

To rebut the presumption, the transferee must show on a balance of probabilities that the transferor had an intention contrary to or inconsistent with the intention the law presumes in relation to gratuitous transfers (Pecore at paragraph 43).

disinherited.com is pleased that a perceptible trend seems to be developing that the trial court’s are now more willing to rely upon the presumption of resulting trust more strongly than perhaps they have in the past, despite the fact that the presumption has existed for hundreds of years in various forms.

The courts appear to be more willing to impose the existing law in these types of circumstances, to say that if a party receives a substantial gift without consideration, then the onus of proof is on the recipient of the gift to discharge the presumption of law and to prove that a gift was intended

A Will Containing Photographs

disinherited.com has over the course of 38 years both prepared and litigated over countless last will and testaments. ( wills).

An  unusual will appeared  today that warrants comment..

The will contained several photographs  pasted in througout the document ,including two of the testator, being one at the beginning and one at the end, photos of the intended heirs, and photos of various specific bequests.

It was very unusual indeed but having reflected upon it, I thought it noteworthy of mention, and in certain circumstances, perhaps even a very good idea.

The will conformed with the execution requirements of the Wills Act, RSBC, so there was certainly nothing about the photographs that in any way affect the validity of the will.

What Are Trusts and Where Do They Come From

What Are Trusts?

It is not always easy to define exactly what a trust is.

Essentially a trust is an equitable obligation binding a person called a trustee, to deal with property over which he or she has control (the trust property), for the benefit of others who are called the beneficiaries.

The trustee may also be a beneficiary, and any one of the beneficiaries may enforce the obligation.

In law, a trust is not a separate legal entity( such as a corporation), except for specific purposes such as for income tax.

Simply put, it is a relationship where one party ( the settlor or testator in a will ) holds and administers  property on certain terms ( the trusts) for the benefit of another ( the beneficiary).

Where Did They Come From?

Trusts developed in England from the times of the crusades, and continue to do so  up to the present.

The law of trusts initially developed through co-operation between English barristers and the Courts, in order to avoid exorbitant taxes and to protect property for the benefit of widows and infants.

Trust settlements primary purpose then was to preserve capital, and Victorian trusts often obliged the eldest son the obligation to maintain widows, educate younger sons, and provide financial inducements for the marriage of sisters.

The entire system of trusts depended very much upon the incorruptibility of the trustee, usually the eldest son.

The Courts of Chancery gradually developed the concepts of “equity” and many of the legal principles relating to trusts were developed to protect beneficiaries against exploitation

For example,  two principal rules developed very early by the Courts of Chancery  were that the trustee must not profit from being trustee, and must not put him or herself in a position in which his or her interests conflict with his or her duty.

There was historical friction between the King’s representative and the Lord Chancellor who established the Courts of Equity.

The Courts of equity began to over rule the King as they had the discretion to declare that the real owner of property, in equity , ( fairness), was another person than found by the King.

Wills Directives to Employ Certain Lawyers, Accountants and the Like are NOT Binding

Wills Directives

It is fairly common for testators to include a provision in a will that the executor should use the services of a particular lawyer or accountant or other such professional, in assisting the executor in the duties that will be performed by the executor.

I would venture to opine that in most of these circumstances it is not a contentious issue and the directive is followed.

However, that can also not be the case, and the chestnut decision of Foster v. Elsley 30 W.E. 596 dealt with that very issue as far back ago as 1881.

In that the decision that there was a testamentary directive to employee a certain lawyer to perform the legal services required by the executor.

The court held that such a directive is not binding upon the executor, but is simply an advisory provision which the executor may disregard of he or she chooses to do so.

The executor is personally liable for proper the administration of the estate.

The position of executor is one where the he or she stands in the” legal shoes” of the deceased so to speak, and it being such a responsible duty, the courts do not want to saddle the individual discretion of the executor to choose an alternate professional, other  than the one directed to be used in the will.

Wills Variation- Provision For Adult Child, With Life Interest to Commonlaw Spouse

will varied common law spouseWill Varied to Small Provision For Adult Child, With Life Interest to Commonlaw Spouse of 4 years, and Gift Over to Son If He Survives Wife

Hall v Roy Hall Estate 2010 BCSC 529 involves a wills variation action between one long estranged son who reconciled 1 1/2 years before his father’s death, another child who remained estranged from his father, and a common-law spouse of four years.

The testator made a will shortly before his death whereby he left the bulk of his estate of approximately $438,000 to his common-law partner of four years.

He left $10,000 and a car to the plaintiff, who was the son who had reconciled the year before.

The court found that the testator failed to make adequate provision for the plaintiff, who was age 60 at trial.

The court gave the plaintiff a $20,000 bequest, with a life estate in the remaining  $418,000 to the common-law spouse,  aged 65, and a gift over to the plaintiff should he survive the common-law spouse.

The court analyzed the two-step process that must occur in a wills variation analysis:

A. The first step is to determine whether adequate provision has been made for the proper maintenance & support of the plaintiff;

B. If the answer to that question is no, then the question on the second step is what provision is adequate, just and equitable in the circumstances of the case.