A recent Ontario case stresses the importance of helping clients understand how important it is to be clear in their will. They need to choose whether they will leave their estate as an outright gift or in a trust. Straddling this line by imposing moral obligations on surviving loved ones is bound to cause future strife.
This estate dispute involved the deceased Will Maker’s surviving common law spouse of 18 years, his teenage daughter, sister and parents. He knew he was dying when he prepared a will in 2022 that unsuccessfully tried to balance the needs and interests of his loved ones.
The only asset to flow through the residue of the Will was his house worth approximately $450,000. He wanted his common law spouse to have a place to live, so he left it to her for “her own use absolutely” with a wish expressed that she would give 20% of the proceeds of the sale of the home to his remaining loved ones – his sister, daughter, and parents.
He left the pre-tax amount of approximately $650,000 to his teenage daughter by way of direct beneficiary designation in the form of his pension and life insurance.
Instead of agreeing to facilitate her deceased partner's wish in his Will, the surviving spouse asserted she would make a dependent support relief claim on the teenage daughter’s funds. The mother of the teenage daughter asserted she would make a reciprocal claim against the residue of the estate. The family did not carry out the Will Maker’s wishes.
Because the house was the only asset flowing through the estate, the executor had no funds to pay the deceased’s debts and taxes, legal, accounting and executor fees. As such, the executor wanted the house sold, but the common law spouse attested she’d be homeless.
To determine whether the common law spouse had to give 20% of the proceeds of sale to the other family members, the court used the “Armchair Rule” to determine what the Will Maker intended. The court reviewed the drafting lawyer’s file notes and recognized the Will Maker’s intention to ensure his common law spouse had a home. The notes also showed that the Will Maker didn’t want to leave the house in trust because he believed his family would honour his wishes as expressed in his Will. The court found that the wish expressed in the Will imposed a moral obligation on the common law spouse to give 20% sale proceeds, not a legal obligation.
There was no winner in this case. The common law spouse had no duty to share the proceeds of sale with the deceased’s family. However, the house had to be sold to pay debts and the surviving spouse had to find another home.
This case highlights the importance of helping clients understand that there are only two ways to leave an estate – either as an outright gift or as a trust.
In this case, the Will Maker could have left the common law spouse a house trust for her lifetime or some shorter period and upon the expiry of that time, the remainder would revert back to his family. He could have left the life insurance and pension to the estate to be used to pay debts first and then he could have had the rest distributed to his daughter and family. This would result in a clear and unambiguous distribution which may have avoided litigation.
I take these lessons from Landry v. Christiansen-Hassett et al:
Ensure coverage for your legal financial dependents, including minor children and spouses.
Ensure enough liquidity in the estate to cover debts and taxes.
Ensure wishes are drafted clearly in an enforceable manner through a well drafted trust or as an absolute gift.
Costs may be borne by the estate in cases where the applicant estate trustee is not acting solely in his/her/their own interest.
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