Once a disappointed beneficiary starts wills variation proceedings, the executor is not permitted to distribute the estate without the consent of the beneficiaries whose interests might be affected, or failing that, a court order. In Davis v. Burns Estate, 2016 BCSC 1982, litigation was commenced by the disinherited daughter of the deceased. As a result, no distributions could be made from the $2.5 million estate to the beneficiaries named in the Will. The daughter argued that her wills variation claim would be prejudiced by any interim distribution. The Court disagreed and ordered a $250,000 interim payment to the deceased’s common-law spouse. The outcome of this case is interesting as it emphasizes the balance of competing interests in wills variation proceedings.
Mother’s will limits estranged daughter’s inheritance
Patricia Burns died on March 17, 2015. Patricia’s Will, dated October 23, 2010, left some personal effects and household property to her daughter Leslie and granddaughter Alexis. The residue of her estate was to be divided 80% to George, her friend of 30 years, and 20% to Brent, her common-law spouse. Patricia’s exclusion of Leslie in the 2010 Will was consistent with Patricia’s earlier Will, prepared in 2005. It specified that Patricia intended to exclude Leslie from further sharing in her estate. Patricia also wrote a memorandum in 2006, witnessed by her lawyer, in which she explained why she limited Leslie’s inheritance: Leslie was not forthcoming with repayment of a loan Patricia made to Leslie to purchase a home, and Leslie had rarely visited or contacted Patricia in 15 years.
Disinherited daughter starts wills variation proceedings
Leslie commenced a wills variation action on August 21, 2015 under WESA s. 60 alleging that Patricia did not make “adequate provision for the proper maintenance and support of [Leslie], the only child of [Patricia]”. Responses to the civil claim were filed by the estate executor and by George on September 17, 2015 and by Brent on October 28, 2015. After that, no steps were taken in the wills variation action filed by Leslie. The outstanding litigation resulted in no distributions being made from the estate. The residue of Patricia’s estate, which included proceeds from the sale of her house in Vancouver, sat in cash in the sum of $2,569,807. No liabilities were owing but for estate expenses including legal fees.
$250,000 interim distribution allowed
In September 2016 Brent applied under WESA s. 155 for payment of an interim distribution of $250,000 from Patricia’s estate. This required Justice Greyell to consider the factors set out in Hecht v. Hecht Estate. Key findings on the Hecht analysis were as follows:
- Amount of the benefits sought to be distributed as compared to the value of the estate: Patricia’s estate was conservatively valued at $2,300,000 after expenses assuming Leslie’s wills variation litigation proceeded. Assuming Leslie was not successful in her wills variation claim, Brent’s 20% share in the residue of the estate would amount to $460,000.
- Claim of the beneficiaries on the will-maker: Clearly both Brent and George had claims on Patricia’s estate as both were named in her 2010 Will. On the other hand, if Leslie’s application to vary the will was successful, Justice Greyell did not think she would be awarded an interest in excess of 50% of the residual value of the estate, given the clearly expressed intentions of Patricia in the 2006 letter and in her two wills.
- Need of beneficiaries for money: Brent was 76 years old. His only sources of income were CPP and OAS. Brent had need for money as his income did not cover his expenses. Evidence from several witnesses confirmed Patricia’s wish that Brent benefit from her estate so that he would be able to travel and enjoy his remaining years. Her wishes went unfulfilled because the affairs of the estate were not able to be wound up due to Leslie’s outstanding wills variation claim.
- Consent of the residual beneficiary to the proposed transfer: Leslie was not a residual beneficiary. George was, and he did not consent (see discussion of prejudice, below).
In light of those factors, Justice Greyell was of the view that it was equitable to grant Brent’s application. The outstanding litigation had resulted in no distributions being made from the estate and a frustration in fulfilling the terms of Patricia’s wishes as expressed in her 2010 Will.
Does interim payment prejudice other claims to the estate?
Interim payment of $250,000 was ordered, despite the objections from both George and Leslie that they would be prejudiced by an interim payment to Brent. George argued that no disbursement should be made to Brent unless a similar and proportionate disbursement of his 80% share in the estate was made at the same time. Justice Greyell was not prepared to order an interim distribution be made to George as George did not bring his own application for an interim distribution. Payment of $250,000 to Brent would not prejudice George’s entitlement to bring his own application for such interim distribution by which the court can judge whether or not he meets the factors set out in Hecht.
Leslie argued that any payment would prejudice her entitlement in her wills variation action, limit the trial judge’s options for any relief the trial judge may consider granting to her, and/or influence the judge in determining her entitlement unless she also received an interim disbursement. Justice Greyell disagreed with Leslie, emphasizing that the court was making no findings whatsoever concerning the entitlement Leslie may or may not have to share in Patricia’s estate. Leslie’s entitlement was a matter solely reserved to the trial judge deciding the wills variation claim. Justice Greyell also pointed out that it was open to Leslie to pursue her claim against the residue of the estate on an expeditious basis.
Take home point on interim payments in wills variation proceedings
BC wills variation proceedings require the courts to balance competing interests. An application for interim payment pending the final outcome of the proceedings also calls upon the court to balance competing interests, based on the Hecht factors. An interim disbursement, if permitted, is not to be taken as determinative of any party’s ultimate entitlement to a share in the estate, and any alleged “prejudice” to a beneficiary or claimant would be flushed out via the Hecht analysis.