Wrestling with WESA
On 31 March 2014, British Columbia saw sweeping changes to its legislation on wills and estates, with the enactment of the Wills, Estates and Succession Act. Aileen Collings, Lisa Collins and Jane Milton get to grips with a few of the significant changes
The Wills, Estates and Succession Act (WESA) repeals and consolidates a number of Acts (including the Wills Act, the Estate Administration Act, the Probate Recognition Act and the Wills Variation Act), while making numerous and significant changes.
What is a will?
Amendments contained in WESA will open the door to documents other than a formal will being given testamentary effect, in that the court is given discretion to dispense with non-compliance with testamentary formalities in certain circumstances for a ‘record or document or writing or marking on a will or document’. This can include electronic data. The key question is whether the record or document reflects the final testamentary intentions of the deceased person.
The court has also been given the power to rectify accidental errors and failure by will-drafters to understand or properly carry out the will-maker’s instructions. Extrinsic evidence, including evidence of the will-maker’s intent, is admissible.
When is a spouse a spouse?
The definition of ‘spouse’ is important for many aspects of WESA, including intestacy entitlements and the right to vary a will. WESA’s definition of ‘spouse’ includes both legally married spouses and individuals who have lived together in a ‘marriage-like relationship’ for at least two years.1 This includes persons of the same gender. While there is no express reference to the need for cohabitation in the definition, it is anticipated that, in most cases, some degree of cohabitation will be necessary to establish the marriage-like relationship contemplated by the legislation.
Of even greater importance are the provisions that dictate when a person ceases to be a spouse, as this will effect their rights under WESA.2 These provisions differ as between legally married spouses and common-law relationships.
Legally married spouses
There are two circumstances in which legally married spouses cease to be considered spouses for the purposes of WESA:
- When an event occurs that causes an interest in family property under the Family Law Act (FLA) to arise. The FLA states that, upon separation, each spouse has a right to an undivided half interest in all family property.3 However, what does and does not constitute ‘separation’ is not defined. The FLA does specify that spouses are not considered to have separated if, within one year after separation, they begin to live together again and the primary purpose for doing so is to reconcile, and they continue to live together for one or more periods totalling at least 90 days.4 This does not assist in determining what constitutes ‘separation’ in the first place, although it does suggest that a period of separation of at least one year is necessary to trigger the section, in the absence of clearer evidence. A similar provision is now being proposed as an amendment to WESA.5 If enacted, spouses will not be considered to have separated for the purposes of WESA if, within one year, they begin living together with the primary purpose of reconciling, and they do so for one or more periods totalling at least 90 days.
- The amending legislation proposes that the other situation be repealed. That situation is where the spouses:
- live separately and apart for at least two years; and
- one or both have an intention formed before or during separation to live separately and apart permanently.
This measure was anticipated to be fraught with difficulties, and we assume this is the reason for its proposed repeal under the amending legislation.
In the case of a marriage-like relationship, a person ceases to be a spouse when one or both persons ‘terminate’ the relationship. There is no time requirement: when one of the parties to the relationship decides it has ended, the spousal relationship immediately terminates. This could potentially lead to a draconian result of spousal rights under WESA vanishing overnight, based on the decision of just one of the parties in the relationship. It could also lead to significant and unintended consequences flowing from a temporary separation or breakdown in the spousal relationship. It is unclear as to how the proposed amendment will affect marriage-like relationships, given that the amendment refers only to ‘separation’ and not to ‘termination’.
WESA significantly changes the survivorship rules. Instead of the previous rule of arbitrarily presuming the younger person survives the older in the case of simultaneous deaths, each person (when considering the succession to that person’s property) will now be considered to have survived the other for the purpose of determining rights to property. In addition, where property is held as joint tenants or as a joint account and there are simultaneous deaths, the property or account is treated as if it were held by tenants in common. Another notable change is that, if a person fails to survive a deceased person by five days, they are deemed to have died before the deceased person. This time can be extended by the will-maker to beyond five days, but cannot be shortened.
A person can opt out of the presumption as to survivorship and the severance of joint tenancy by expressing a contrary intention in an ‘instrument’, which is broadly defined to include other legal documents. This may expand the search that executors need to make to determine the intentions of the will-maker beyond the will. However, given the general requirement that the person must survive by five days (or is deemed to have predeceased the other), there is a question of whether a person can ever really opt out of the presumption of survivorship or the severance of joint tenancy in the case of a simultaneous death.
The new survivorship rules do not apply to insurance money when there has been a simultaneous death. That continues to be governed by the Insurance Act (IA) of British Columbia, which provides that insurance money is payable as if the beneficiary had predeceased the person whose life is insured. However, there could be a question as to whether the WESA five-day survivorship requirement may apply to insurance contracts, as the IA only speaks to the occurrence of simultaneous death (or where it is uncertain who is the survivor).
Probate and multiple wills
WESA also brings into effect a new set of probate rules, resulting in significant changes to procedures and forms. A change in language in these new rules appears to open the door to using multiple wills in British Columbia. Multiple wills are used to maintain privacy of assets, ease administration, and avoid probate fees on assets that generally do not require probate to transfer, such as private company shares. Under the new wording, the application for probate must include the property that passes to the applicant in their capacity as the person’s personal representative. Under the multiple will strategy, one will deals with the property for which probate is required to transfer (such as real estate), and the other will deals with the property that does not require probate (and thus is not submitted for probate). Best practice is to name different representatives for the two wills.
However, due to wills variation concerns, it is uncertain whether the door to using multiple wills is open very far. WESA did not make changes with respect to wills variation legislation, despite recommendations to that effect in the British Columbia Law Institute report. If a will-maker does not make adequate provision for the proper maintenance and support of their spouse or children (including adult children), the court can still order the provision that it thinks adequate, just and equitable to be made out of the estate. A proceeding must be commenced by the spouse or children within 180 days from the representation grant. In addition, the personal representative must not distribute the estate in the 210 days following the date of the issue of the representation grant, except with the consent of all beneficiaries (including those that would have inherited under an intestacy) or by court order. Thus, if a grant of probate is never obtained with respect to a will (i.e. the multiple will), the limitation period for making a wills variation claim may never expire. The spouse and children may have a continuing right to challenge these wills.
Alternative solutions that are increasingly being used for those clients who are 65 or older are alter ego or joint partner inter vivos trusts. By transferring the property to the trust during their lifetime, it is removed from the estate, and thus probate. The trust then dictates the eventual distribution of the property and the wills variation rules do not apply.
Gifts and loans
Another change made by WESA affects gifts and loans made by the will-maker. WESA dispenses with the common-law presumption that a gift made during a will-maker’s lifetime to a child is an advance of that child’s inheritance. The gift in the will now survives and takes place according to the terms in the will.
Similarly abolished are the presumption that legacies in a will are revoked if the will-maker made a lifetime gift in the same amount as the legacy, and the presumption that a debt owed by the will-maker is satisfied by an equal legacy to a creditor. If these are to be accounted for in the estate, it will be important to specifically provide for this in the estate plan.
Benefit plan beneficiary designations
WESA includes a new framework for benefit plan beneficiary designations. WESA benefit plans are defined generally as those that provide benefits to employees, their dependants and beneficiaries, including pension or retirement plans, welfare or profit-sharing plans and others. WESA benefit plans also include arrangements for the payment of an annuity, registered retirement savings plans, registered retirement income funds, and tax-free savings accounts defined under the Income Tax Act (Canada). The new pooled registered pension plans are a pending addition to this list and new forms of benefit plans can be added through regulation.
The WESA benefit plan beneficiary designation sections do not apply to contracts of insurance or declarations for life insurance or accident and sickness insurance. These are governed by the IA. Additionally, WESA takes a back seat in these sections; where there is a conflict or inconsistency with other British Columbia or federal enactments, these prevail. An example would be where a pension member (under the federal or British Columbia Pension Benefits Standards Act (PBSA)) unilaterally wishes to make their child the beneficiary of a registered pension plan and not their current spouse. This would not be effective, as preferential spousal requirements under PBSA take precedence.
Under WESA, a designation may be made in a will, on a benefit plan administrator’s form, or be a declaration made in a written or electronic document or legal document or agreement. The scope is therefore broad. Electronic documents include emails, and legal documents could include cohabitation or marriage contracts, land title documents, joint account documents and shareholders’ agreements.
A beneficiary designation under WESA is rather informal. It needs only to contain enough detail to be able to identify the plan contract, benefit and intended beneficiary or beneficiaries. For written documents, forms or agreements other than a will, the person making the designation signs, with no witnesses required.
WESA now allows an irrevocable designation, but this cannot be made in a will and must be filed with the specified office of the benefit plan administrator. Due to imprecise wording in the legislation pertaining to irrevocable designations, creditor protection during a participant’s lifetime may be limited under WESA. In contrast, the parallel provision in the IA (and similar legislation in most provinces) more explicitly allows that an irrevocable designation (or one in favour of a spouse, child, grandchild or parent) protects insurance money at death and during lifetime. Thus, if one wishes to better ensure creditor protection for savings not covered by other enactments, regulated insurance company contracts may be of practical use.
Under WESA, benefit plan administrators will be absolved of liability in relying on beneficiary designations on file, but they now have a more onerous administrative burden in ensuring compliance with the new irrevocable designations. Executors will have far-reaching responsibility to search out beneficiary designations that may be in conflict with the will. With designations now allowed in electronic format, in other agreements and legal documents, there is a much broader search mandate.
Lawyers and other professionals have been busy learning the new legislation and examining how it may affect their clients. A key question is whether clients need to have new testamentary documents in light of WESA. A will that was valid under the repealed Wills Act will still be valid under WESA. However, given the extent of the changes that this new legislation has introduced, it may not be readily apparent as to whether new testamentary documents are warranted unless a detailed review of the client’s current situation and circumstances is made.
For many people, the introduction of WESA may be the impetus for undertaking a long-overdue review of their estate plans.
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