In Erlichman v. Erlichman Estate, 2002 BCCA 160 the court was asked to decide whether concerns about a widow’s ability to manage money should prevent her from receiving an inheritance outright. The executor argued that the widow was of advanced years and unsophisticated in business affairs, so should not be burdened with managing an inheritance.
Original will provided widow with an outright inheritance
Rose and Abraham Erlichman were married in 1945. They had no children together, but each had a biological child from their first marriage. In 1988, the Erlichmans each made a will: Rose left all of her estate to be divided equally between Abraham and her biological son; and Abraham left all of his estate to be divided equally between Rose and his biological son, Harry.
New will limits the widow’s inheritance
In February 1998, less than three months before he died, Abraham made a new will. He again left one-half of his estate to his biological son, outright. However, Abraham changed Rose’s inheritance so that she was left with only a life estate (also called a “life interest”) in the income of the other half of his estate. When Rose died, the remaining interest in the property would then pass to the next person named in Abraham’s will.
Abraham died on May 1, 1998, leaving an estate valued at $2,000,000. At the time of Abraham’s death, virtually all of the Erlichman’s assets were registered under his name and were under his exclusive control. Throughout their 53 years of marriage, Abraham handled all banking and financial matters.
Widow asks will to be varied to give her an outright inheritance
After her husband’s death, Rose challenged the will, arguing that a life estate failed to make adequate, just and equitable provision for her. At trial, Abraham’s son, Harry, argued against Rose getting an outright inheritance on the basis that she was of advanced years (77 at the time her husband died), unsophisticated in business affairs, and should not be burdened with the management of money. The judge was persuaded by Harry’s evidence about the widow’s ability to manage money and dismissed her claim.
The widow appealed. The Court of Appeal decided that the trial judge did not give enough weight to the legal and moral obligations owed by the Abraham to his widow, and also determined that the concerns about her ability to manage money were unsupported. The will was varied so that the widow inherited half of her husband’s estate for her own use absolutely.
Legal obligation to provide widow with just and adequate inheritance
When deciding whether to vary a will, the court will look at the maintenance and property allocations which the law would support during the will-maker’s lifetime. The legal obligations imposed on a person during his lifetime are an important indication of the legal obligation to provide “adequate, just and equitable” maintenance and support after death.
At the time of his death, Rose was the only person to whom Abraham owed a legal obligation. This was not a case involving a short-term marriage, multiple families, or dependent adult children. Nor was it a case in which the spouses held substantial assets in their own names, or conducted their financial affairs independent of the other. There was no doubt that in these circumstances, the widow would have been entitled to one-half of their joint assets had she applied for a division of assets under family property legislation immediately prior to her husband’s death. A life interest in one-half of the estate would not adequately meet the legal obligation Abraham owed to Rose.
Should concerns about widow’s ability to manage money prevent an outright inheritance?
In this case the court decided that the concerns about the widow’s inexperience with financial matters and the burden of managing money should not prevent her from inheriting half of the estate outright, for the following reasons:
- The widow’s competence not challenged:
- The court noted that as of 1988 (when the wills were originally drafted), Abraham viewed Rose as capable of managing a significant sum of money. Rose’s general competence was not challenged at trial. Rose told the court that she had a conservative plan for management of the funds, and she had been paying bills, doing banking, and hiring persons to prepare tax returns since her husband’s death. There was no basis on the evidence to conclude that she could not learn to manage the inheritance.
- Deserved and desirable independence for the widow:
- The widow should not be put in the position of having to resort to the executor’s discretion to receive the inheritance to which she was entitled.
- Widow should have freedom to provide inheritance in her own will:
- The widow should be entitled to provide for her own offspring how she sees fit. Rose would not be able to do this if she only received a life estate. It is of note that the widow’s beneficiaries (her grandchildren) supported the application for her to have the inheritance outright – this indicates that they did not share Harry’s concerns about her ability to manage an outright inheritance.
The bottom line on the widow’s inheritance
In this case, the widow’s advanced age and lack of sophistication in business affairs were not sufficient reasons to prevent her from receiving the inheritance to which she was entitled. In other cases (for example, where incompetence is a factor), it may be that a life estate or trust is more appropriate so that a surviving spouse is not unduly burdened with the management of money.