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Estate Law, Wills Variation

Interim Disbursement Refused as it Amounted to Re-Writing of Disputed Will

BC courts have discretion to order interim payment from an estate before the trial and determination of a wills variation claim. What the courts do not have is the discretion to approve of an interim disbursement that would in effect be a re-writing of the disputed Will. In today’s post we will look at Henney v. Sander, 2014 BCSC 889, a case in which the court refused an application for interim distribution from an estate. Approving the proposed disbursement would be permitting the parties to re-write the Will without regard to the will-maker’s intentions. 

Wife left out of husband’s Will

At the heart of the Henney case was a husband and wife who married in BC in 1953. They had a 58-year marriage which ended upon the husband’s death on September 30, 2011. They had no children together, but the wife had children from a previous relationship. The husband died leaving a Will dated November 14, 2008 which directed that the residue of his estate be divided into 10 equal shares. Six of those shares, constituting 60% of the residue, were to be divided among 8 named step-nephews and step-grandchildren. The remaining 4 shares, or 40% of the residue, were to be paid to charities. His Will made no provision for his wife. Shortly before his death, the husband swore an affidavit explaining his wife was omitted deliberately as she was already financially secure and because his wife was a United States citizen; he was concerned that her estate would have to pay significant U.S. estate taxes.

Wife’s application to vary the Will

The estimated gross value of the husband’s estate at his death in 2011 was approximately $35 million. Because the husband had no children, his wife was the only person having standing to bring a wills variation claim against his estate. Not long after the wife’s wills variation proceedings were commenced, she died, leaving an estate valued at $6 million. Her Will made certain specific bequests and divided the residue of her estate equally among her surviving children. If her husband’s Will was varied in her favour, her daughters would benefit as the residual beneficiaries of her estate. A mediation took place in 2013, at which some the residual beneficiaries (the charities and two of the step-grandchildren) agreed to a settlement which would give a portion of their respective shares of the husband’s estate to the wife’s surviving children. The remaining beneficiaries did not agree to the proposed partial settlement.

Court refuses to approve the interim disbursement

The executor of the wife’s estate applied for approval of the interim distribution in accordance with the proposed partial settlement reached at the mediation. Weighing all of the factors as set out in Hecht Estate, Justice Perlman refused to approve the distribution proposed in the partial settlement. In Hecht, the amount of the proposed interim payment was small in relation to the total value of the estate. Hecht was distinguishable from the Henney matter in several respects. In Henney, there was no evidence of immediate financial need on the part of any of the parties who were in favour of the proposed interim payment. Six of the residual beneficiaries in Henney opposed the interim payment. The size of the proposed payments and the persons to whom they would be paid were the main sticking points in Henney:

  • The settling parties sought approval of distributions totaling $11.6 million, in percentages and to persons other than as provided for in the husband’s Will. By the time the application was heard, certain specific bequests had already been paid out from the estate by consent, leaving the estate valued between $24.6 and $27.3 million. The proposed distribution was nearly half of the remaining estate.
  • A total of $4.4 million of the amount proposed for distribution would be paid to the wife’s daughters in advance of a determination of the wills variation claim on its merits. Neither of the wife’s surviving children was left a share of the residue in the disputed Will, and neither had legal or moral claims against his estate. Justice Pearlman noted that the trial judge may find no basis for any variation of the Will. If the wife’s wills variation claim was not successful at trial, her daughters were not entitled to any of the residue of his estate.
  • Alternatively, the trial judge may conclude that the Will should be varied, but in a proportion other than the percentages agreed by the settling parties. In other words, there was some risk that the proposed partial settlement might constrain or embarrass the trial judge in the event of conflicting outcomes. This tension was hinted at (but not found on the facts) in a case we recently discussed. Bearing in mind that the husband and wife were married for 58 years, the amount of the proposed partial settlement created the potential that a variation of the husband’s Will, if allowed, could encroach on the amounts requested for interim distribution.

Justice Pearlman concluded that the court was in effect being asked to approve a variation of the Will before trial, and without having all of the evidence necessary to determine, on the principles stated in Tataryn v. Tataryn, [1994] 2 S.C.R. 807, whether the husband made adequate provision for his wife, and if not, what provision is adequate, just and equitable. It is for the trial judge in the wills variation proceedings to hear the evidence relating to the will-maker’s intentions and his legal and moral duties to his wife. The trial judge will also have the benefit of full submissions on the potential liability of the wife’s estate for US estate tax, the extent to which that was a factor in the husband’s exercise of his testamentary autonomy, and whether or not it provided a rational reason for his decision to exclude his wife from his Will. In short: while the result requested by the proponents of the proposed partial settlement might be speedy, it would not constitute a just disposition of this proceeding. Allowing the interim application would be allowing the parties to re-write the Will in a manner that disregarded the will-maker’s intentions.

Take home point on interim disbursement in wills variation proceedings

BC courts may approve interim payment by an executor from an estate, notwithstanding a pending claim for variation of a will. The court may not exercise that discretion where the proposed distribution amounts to variation of the will before trial, without evidence. Such a result would not be just.