Connections between Canadians and Americans have never been as abundant or transparent as they are now as many Canadians own American property, have American spouses or partners, and have children and grandchildren born or living in the United States. As a result of this trend, estate planning for people with assets and connections to both the United States and British Columbia has become increasingly frequent, as have examples of legal pitfalls people in cross-border situations are facing.
For sometime now, courts in British Columbia have had the power to cure deficiencies in some circumstances where a will-maker has taken real steps to make a will, but certain formalities have fallen short. The Wills, Estates and Succession Act, S.B.C. 2009, c. 13 (“WESA”), recognizes that a failure to meet formal requirements should not automatically result in a will-maker’s “testamentary intentions” being defeated for that reason alone. However, the British Columbia Court of Appeal in Quinn Estate v. Rydland, 2019 BCCA 91, held that a clause in a will directing estate property to be transferred to a trust created before death is invalid and that Section 58 of WESA does not enable a court to give testamentary effect to a document that the will maker never intended would be a will.
The Quinn Estate
On April 1, 1996, legendary Vancouver Canucks coach Pat Quinn (“Quinn”) executed his Last Will and Testament in respect of his Canadian assets situated in Canada. Although his Will was prepared by a U.S. attorney, it was executed in British Columbia with all requirements for proper execution for a will observed. Quinn’s Will provided that the residue of his Canadian estate would “pour over” into a U.S. trust, referred to as the Quinn Family Trust (“QFT”), which was settled on March 4, 1996.
A “pour-over” clause purports to make a gift to a trust that is in existence at the time the will is made. A “pour-over” clause is also generally viewed as “a dispositive provision directing that all or part of the estate should be added to the corpus of an existing trust, the terms of which were not reiterated in the will itself.”[1] Quinn executed the trust declaration contemporaneously with the execution of his Will. About one year after Quinn executed his Will, certain administrative provisions of the QFT were amended to ensure that it would be considered a Qualified Domestic Trust for U.S. tax purposes. Under the QFT, the settlors, namely, Quinn and his wife, were the first beneficiaries. Following the death of the surviving settlor, the beneficiaries were their children.
The terms of the trust agreement allowed Quinn and his wife to amend the QFT. Because they could amend the QFT, the beneficiaries could be changed without compliance with the requirements of section 37 of the WESA. As a result, on March 9, 2018, the Honourable Justice Funt of the BC Supreme Court declared the “pour over” clause in Quinn’s Will invalid. He did so on the basis that the gift of the residue could not “pour over” to be held by the trustees of the QFT on terms existing at the time the Will was executed, given that the trustees were obliged to follow the terms set out in the amended QFT. The Honourable Justice Funt also determined that the clause was not “cured” by section 58 of WESA and the result was that the residue of Quinn’s estate would be distributed on intestacy pursuant to part III of the statute.
The decision of the Honourable Justice Funt was subsequently appealed by one of Quinn’s daughters; however the appeal was dismissed by the Court of Appeal for British Columbia on March 14, 2019. The Quinn estate highlights the need to get specialized tax and legal advice with respect to implications on both sides of the border. If you have any questions, need advice or assistance upholding regarding curative provisions of the WESA, contact Miller Thomson’s estate litigation team.
[1] lan N. Polasky, “‘Pour-Over’ Wills – and the Statutory Blessing” (1959) 98:10 Trusts and Est. 949.
