Christine Borstinsong died in Ontario on June 13, 2006. She had no will, and no family members to step forward and claim her estate. There were no children, no siblings, no parents or grandparents, no nieces or nephews, and no first or second cousins. All she had was her boyfriend, Nick.

Because she had no family, the government started the wheels in motion to claim her estate. Nick, who had little property of his own, stepped forward and started a court action, hoping he could convince a judge that he had been her“common-law husband.” A common-law is generally able to exert rights and claim cash from a partner’s estate if they have been left out.

Seven witnesses were called over a three day trial, including neighbors, friends, and Nick himself. Christine had been a unique lady, and the witnesses were a colourful group.

It became clear that Nick had stayed with her at her house for extended periods. He shared her bed. The two of them went for walks in the neighborhood. He was seen cutting the grass and cleaning the pool. He claimed that they had considered each other as husband and wife.

On the other hand, he also had a wife across town during the entire time he was seeing Christine. His wife lived in a house she jointly owned with Nick and he had a room there. Nick said that he was estranged from his wife. Why no divorce? He said that getting a divorce from his wife would be too expensive. Nick took the position that although he was married to his wife across town, he was still a common-law husband to Christine.

Christine liked to dance and have fun. Nick was the last in a long string of boyfriends — she favoured exotic men who spoke English as a second language. The most colourful of all of the witnesses at the trial was one of those former boyfriends. His name was Constantine. He told the court that Nick was just Christine’s casual boyfriend, no more.

The court had trouble believing Constantine. He was a butcher and, according to the judge, had been injured several years prior “when a side of beef fell on him, which impacted his hearing, his vision, and his memory.” Constantine was also very emotional as he gave his testimony. It became clear that Constantine was jealous of Nick. At one point during his testimony, he told the judge that Christine had always “wanted to be a stripper,” and offered to show the judge a photo. The judge declined.

Nick won his case. The judge concluded that Nick had indeed been Christine’s common-law husband during the years prior to her death.

Several lessons emerge from Christine’s story.

First, a common-law has rights to property at your death. If you live with a person for long enough, he or she has a legitimate legal expectation that you will take care of them at your death. Even if you have a will, they can override it by bringing a claim under dependents’ relief legislation. They might be entitled to a part of your estate, or all of it. It depends on the facts. If they are wealthy in their own right, they might be entitled to “nil.” Some estate planning strategies are available in provinces like British Columbia, Saskatchewan, Alberta and Manitoba to limit or avoid the claim of a dependent. Interestingly, a common-law spouse cannot sign a contract giving up claims as a potential dependent of an estate.

Second, a side of beef can do a lot of damage.

Third, if you have no will and no family, your property will go to the government when you die. Property must have an owner under our legal system. In legal terms when a person dies without family, property is said to “escheat” to the provincial government, “propter defectum sanguinis” (lawyers love Latin). Having a will avoids that.

What did Nick get? The judge ordered that Nick be allowed to live in her house, with the pool, for the rest of his life. Nick was also given a living allowance to be paid to him monthly out of the estate assets. After his death, whatever was left would go to the provincial government.

Christine’s story is a true one. The facts are taken from the published decision of the judge who heard the case. The names were changed to prevent embarrassment.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Jack Wilson could neither read nor write, and signed his name by making an “X.” Living in the Maritimes, he amassed some 250 acres of land, had a handful of children, and survived two wives before dying on March 28th, 2006 at the age of 94.

When he died, one of his granddaughters produced a will dated December 10, 2003. Her name was Lucinda. The will left half of the estate to her.

Other members of the family challenged the will, and the matter went to court. A curious story emerged.

There were actually two wills. There was the will that Lucinda liked, signed just before Christmas in 2003 and cutting her in for half of the estate. There was also an earlier will, dated ten months earlier in 2003 just as spring was breaking. Lucinda hated that will – it had nothing in it for her.

When the first will was drawn, Jack went to his longtime lawyer. The lawyer later commented that at the time the will was made, Jack was bent over, frail, hard of hearing, and used a cane.

No surprise there, Jack was 91 at the time, and had suffered from diabetes and kidney failure for several years leading up to the spring of 2003 when the will was done. He was gradually dwindling away.

The lawyer testified that Jack was clear about what he owned and what he wanted. Jack wanted his wealth to go to the children who were collectively helping him with day to day living at that time. The lawyer prepared a will, and then read it over with Jack. Jack signed it by making his “X” at the spot where a signature would normally go. Jack asked the lawyer to store the will for him at the lawyer’s office. That was that.

Ten months later, Lucinda made an appointment with another lawyer to have the second will prepared. She told the new lawyer that she was going to bring in her grandfather because he wanted to make a new will. That lawyer testified that she met with the client three times, and that he was elderly but able to describe his assets and family tree with good detail. Again, the lawyer prepared the will, read it over to her client, and her client made an “X” instead of a signature when it came time to sign.

When the second will was prepared, there was no cane. The client’s hearing was fine. He was not stooped over. The client was old, but appeared to have some spring in his step.

Either the will was signed by an imposter or Jack was aging in reverse, like the movie character in “The Curious Case of Benjamin Button.”

The situation became clearer as additional facts came out during the court case.

At some stage, papers were signed to make Jack’s bank accounts joint with Lucinda. At his death, there was no cash in the estate to pay for the probate process.

Late in 2003 Lucinda had asked her grandfather to sign some papers relating to his house, ostensibly so she could help him out with his realty taxes and a zoning problem. Jack showed the papers to another family member. The papers turned out to be a deed to his house. Jack refused to sign them.

It looked like Lucinda had been involved in a systematic effort to fleece her illiterate granddad.

The court had no trouble in throwing the will, and Lucinda, out of court. The estate went to the heirs that Jack had named in his first will when he met with the lawyer he knew and trusted.

There are a couple of interesting lessons here.

First, greed is transparent. If Lucinda had stopped with the sneaky will, she might have got away with it. She went on to try the swindle on the land, and joint ownership on the bank accounts. The pattern screamed of deceit. The family, and the first lawyer, were understandably suspicious and were looking for a reason to set aside the will.

The second lesson is for lawyers. The lawyer who met with the spry imposter did not ask for identification or take a picture of the client. The lawyer blindly relied on the honesty of the two persons in her office. That is not out of the ordinary. It is what lawyers generally do. The client’s signature normally vouches for the authenticity of a will. When an “X” is involved, it is harder to check. The same is true when the client is very old or very sick, and the signature is very, very shaky. Perhaps lawyers should be asking for identification in those cases, or photographing their clients.

The story of Jack and his curious will is a true one. The details were taken from the published decision of the judge who heard the case. Names were changed to save the family embarrassment.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Amber is a doctor. Her husband Rob is a dentist. Both are successful at what they do. Their combined income is impressive. In their early fifties, Rob and Amber have three young children and no spare time.

Rob and Amber are also the kind of people who like to plan. They both have wills. The wills are tax efficient.

Those tax savings work fine under current rules. Yet the tax savings are not a sure thing. Why? Rules change. The government can always amend the Income Tax Act to change the income tax provisions at work in structures like those being put in place in the wills for Rob and Amber. The younger the person is, the greater the risk that tax changes will occur before they die.

That got Rob and Amber thinking about their parents. Amber is an only child and expects to inherit roughly $800,000 from her father. Dad’s will is a six-page, dime store special. She will inherit in the form of cash on the barrel head after he dies and the dust has settled on his estate. Investing her inheritance, she can expect to generate upwards of $40,000 a year in income. Because she is has a high income of her own, that additional income will be taxed at the top income tax rates under the Income Tax Act. That means that nearly half of the income generated by the inheritance will be taxed away.

It does not have to be that way. Her father can replace his six page will with a twenty-six page will. The extra pages are to structure and establish a testamentary trust for Amber. When the dust settles, the inheritance will be owned inside the trust. The income it generates will be the trust’s income, not Amber’s.

A testamentary trust is taxed as a separate tax-payer, and accesses a fresh set of marginal rates under the Income Tax Act. That means that more than $100,000 of income can be generated in the trust without seeing any of it taxed at the top tax bracket applicable to Canadians. The first $40,000 or so will be taxed in the bottom tax bracket.

In Amber’s situation, the tax savings from accessing a separate set of graduated rates will amount to nearly $7,000 a year. It works even if the trust pays the income out to Amber. Special provisions allow it to be taxed in the trust even if it has been used by a beneficiary.

If her father dies while Amber’s three children are still financially dependent on her, the trust can be designed to support income splitting. She can use income from the trust to support the kids, paying for things like bicycles, books, music lessons, and private school tuition. Because her children are small, and have no income of their own, she can spend roughly $10,000 per year of trust income on each child and have it sheltered in their hands using their personal exemptions. That will effectively increase the tax savings available in the structure from $7,000 per year to a larger annual figure of $14,500. That will add up.

Amber would love it if her dad did the longer, fancier will. The new will would be costly. On the other hand, dad is old and apt to die sooner rather than later. Old means that tax rules are more likely to remain in place and unchanged when he dies. His tax planned will is a better investment than the one Amber has put in place for her own estate.

What should Amber do? Talk to her dad. He may be willing to change his will if he understands the benefits she hopes to reap. Some families are open about such things, and dad wants the best for his daughter and his grandchildren.

Amber might also consider volunteering to pay for the new will. Dad will not object to that. When he hears the price per page of the new will, the shock might kill him.

Amber would be well advised not to wait. As Dad gets older, each week that passes is a risk that he might die before a new will can be put in place.

Amber is not real. Her circumstances blend the facts taken from the dozens of clients who approach us each year with their parents in tow.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Mr. R. Dodds lived in England while World War Two was in full swing. He was divorced from his wife, and had four children.

He lived in trying times. The Battle of Britain had been waged and won. England had been heavily bombed. The invasion of France seemed an impossible task. On July 26th, 1942, the British Minister of Food had announced a tightened ration for chocolates and sweets (a half pound per person each month).

Three days after the chocolate ration was announced, and unbeknownst to Mr. Dodds, a personal war was declared against him on July 29th, 1942. The aggressor was a Mr. Piper, who launched his offensive in a lawyer’s office by signing a will. The will would, at Mr. Piper’s death, set aside two large funds of money, one for the wife Mr. Dodds had divorced and the other for the four children Mr. Dodds had sired.

The will was signed in secret, but hostilities broke open six months later when Mr. Piper died on January 30, 1943 and the will was read over and put to probate.

First, there was the fund for Mr. Dodds’ ex-wife. The fund was to be invested and structured so she was to receive the income, but the income would end if she moved back in with Mr. Dodds.

Then there was the fund for Mr. Dodds’ children. The children would get the money at age thirty but only if they did not live with their father, Mr. Dodds, prior to attaining that age.

It was a curious kind of war. The clauses, if valid, prohibited cohabitation between Mr. Dobbs and his ex-wife and children, but not contact. The condition governing the children, for example, provided that if they set foot, day or night, in any premises that their father owned or rented, they lost the inheritance from Mr. Piper. They could see their father in the street, attend the theatre together, go out for a meal, but could not cross the threshold of his home without fear of losing the inheritance. Mr. Piper’s intention with his will appears to have been to force Mr. Dobbs to sit alone, in an empty house.

The will was awkward for everyone. It was awkward for the executors who were charged with handling the estate. Think about it — were the executors supposed to post someone in the bushes outside of Mr. Dobbs’ flat? How else would they monitor the comings and goings of visitors?

The will was so awkward that everyone took time off from the real war to go to court and have the offensive provisions of the will declared void. The court rewrote the will by striking out the conditions preventing co-habitation. The ex-wife still got the income. The kids still got the inheritance at age thirty.

The story of Mr. Dodds and Mr. Piper is a true one. The details are taken from the published decision of the judge who heard the case.

The law will not allow a clause in a will that disinherits family members if they have contact with each other. A clause having that effect can be struck down by a judge as being against public policy. In lawyer talk, the clause is malum prohibitum (lawyers love Latin).

Other types of clauses are prohibited. Clauses that compel beneficiaries to break the law are not allowed. The law gives judges a general discretion to strike down clauses in wills if the operation of the clause fosters behavior that is harmful to the community.

Clauses that encourage good behavior are allowed. Thus, a provision can be built into a will that provides a generous income for beneficiaries who are attending university. Clauses can be constructed requiring beneficiaries to exercise, or volunteer with charity, or stop smoking and remain nicotine free.

Some clauses are harder to characterize. A rich lawyer died in Ontario at the beginning of the last century setting up a contest and leaving a huge fortune to the winner. What was the contest? The winner was to be the woman, whoever she might be, who could give birth to the most babies in a ten year period following hisdeath while residing in the Toronto. The clause was attacked by family members hoping to strike it down as against public policy. It encouraged people to have babies – thought in most circles to be a good thing. It encouraged people to have a lot of babies — too many babies can be a bad thing. What did the court decide? The clause stood. The contest resulted in a tie, and the fortune was split among four mothers who had each given birth to nine babies during the ten year period.

Next month’s column: “War chest” clauses.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Harriet Thomson had three sons and lived Niagara Falls, Ontario. As the decades came and went, one or two of the boys appeared to be living at home pretty well all of the time. That was true both before and after her husband died. That remained true as she grew older, and as her health began to fail. They lived with her until she died. It was a family wide “failure to launch.”

The boys were named Robert, William and David.

After the death of her husband in July of 1994 Harriet redid her last will and testament. At that time Robert was at home as part of a 14year stint with his mom. Her 1994 will gave Robert the right to live in her house for a year after she died, and to buy the house for 60% of its fair market value at the end of the year. The house was her major asset, and the discounted purchase price was a huge bargain. The will also divided her remaining wealth among her three boys, but not equally. The split was 20%, 40%, 40%. Robert not only got the house, but one of the larger shares of 40%. Advantage: Robert.

Robert moved out three years after the 1994 will was signed. That was a mistake.

It left William at home with Harriet. He looked at the will and decided it was time for a new one, even though Harriet was old and sick. It would cut out the house clause for Robert – a major victory for William. Also, because William was on social assistance at the time, he made sure that his share would go to his daughter, not directly to him. That made sure the government would not get at his inheritance.

He hand wrote the will for Harriet in 2004, and then invited a camera person and a pair of friends over to the house to act as witnesses. He had decided to shoot a video to prove his mom, Harriet, had the necessary mental capacity to do a new will.

He had the camera set up, and the witnesses in the room and, presumably, said “action.”

As the camera started to roll he asked his mom “What was dad’s regiment number in the war?” She answered correctly. A coup! He then repeated a family story and asked his mother if she remembered it. She did. Another coup! After that he read the will to her and had her sign it along with the two witnesses.

The new will exterminated the sweetheart deal for Robert.

It was also kept secret from Robert. Moreover, William made sure that Robert was never, ever, alone with his mother again. William, or someone of his choosing, was there “24/7” to make sure that no one could talk to Harriet about a new will. By that point she was terminally ill and the finish line was close at hand. Advantage: William.

After Harriet died, Robert discovered that a new will had been orchestrated after he moved out.

Robert sued. He alleged that Harriet did not have the necessary mental capacity to do a new will – she was too sick and too malleable. William defended the action, pulling out the video for its screen debut for the lawyers and the court. The third son, David, did not take a position in the litigation – he appears to have been the quiet one, and happy with his 20% share.

What did the judge say about the video? Two thumbs down. First of all, the judge said the whole thing looked and felt like a staged play. It did not, in any way, convince the judge that Harriet had her marbles. On the contrary, it showed how easy it was to manipulate her. The judge could not resist, and went on to say that William was guilty of “overacting.” The court refused to accept the will for probate.

There are lots of examples of cases where a video or audio recording have been successfully used to buttress a will. William did not know what he was doing and asked Harriet the wrong questions. If William had hired a lawyer to be the “producer,” and to ask the right questions, the will might have stood up.

One more lesson can be drawn from all of this. Greed is transparent.

Harriet’s story is a true one. The details were taken from the published decision of the court that heard the case. The names were changed to save the family embarrassment.

Next month’s column: Giving advice from the grave.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Bill Smith had two sons by his first wife, and then a daughter by his second. His second wife, Mary, appears to have been headstrong and intelligent.

When Bill and Mary were in their 80’s, they arranged to have their daughter move in with them to help out. It worked out well. Their daughter needed a place to live. They needed the help around the house. Bill ended up in a wheelchair, and their daughter worked hard.

Bill and Mary were grateful. They decided to change their wills to give the house to their daughter after the second of them died.

The new wills were signed, and everything was good until the two sons found out what their father and stepmother had done. They hated the idea that their stepsister would get the house. The boys were quick to interfere, but slow to help out.

The boys tried to pressure their father, Bill, and stepmother, Mary, to change the wills back, and leave everything (including the house) in three equal shares. Mary was having none of that. With Mary at his side, Bill was also able to withstand the pressure his sons put on him. The wills stayed as is.

As the years rolled on, their daughter continued to take care of Bill and Mary. Bill was forced into a personal care home. Mary contracted cancer.

It was clear to Mary that she would die first. It was a matter of months for her. She was still mentally sharp, and made a prediction. She predicted that as soon as she died, her stepsons would approach their father in the personal care home, and he would sign anything they asked him to. Further, the new estate plan would strip their daughter of her claim to the house – something that Bill and Mary had genuinely wanted to see happen. Their daughter had been working hard to make their lives better. She asked little or nothing in return. The situation was a little like the Cinderella story.

So Mary took one last series of steps to protect their daughter from Mary’s stepsons. She hired a lawyer of her own. She altered the title to the family home so it was no longer in joint tenancy. That meant that a half-interest in the house would fall into her estate. She then redid her will to leave that half interest to their daughter.

If Mary’s estate plan held up, their daughter would get half of the house and nothing the boys or Bill did could alter that.

Her prediction came true. Shortly after she died the boys swung into action. Changing Dad’s will was no longer enough. They had to overturn their stepmother’s estate plan. Bill, as predicted, let them run the show. They hired a lawyer in Bill’s name and went to court to attack Mary’s estate plan. They claimed that the cancer had addled her brain.

Here was their problem. It was clear that Mary was shrewd and mentally capable right to the end. Their case was a dud. The judge found in favour of the daughter.

There are two things we know about lawyers. They like Latin, and they are expensive. The daughter’s lawyer charged $118,111.76 to win the case. The sons’ lawyer charged $99,592.36 to lose it. There are situations where the estate will pay everyone’s legal fees. The rule changes when litigation is stupid and mean-spirited. Bill was ordered to pay the legal fee his daughter had incurred. The terrible thing here is that Bill was the puppet of his sons.

There are several lessons to take away from this story. First, blended families tend to fight after the death of one of the parents. Second, kids often push old and doddering parents into the ring to fight for them. Third, a well constructed estate plan will not break apart when someone tries to hammer it. Fourth, hiring lawyers and litigating can be hugely expensive. Fifth and finally, if you push a weak case and lose, you can pay huge court costs.

Bill and Mary’s story is a true one. The details were taken from the published decision of the court that heard the case. Names have been changed to save the family embarrassment.

Next month’s column: estate planning home movies.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

John Jones was 88 years old when he decided to draft a new will. His family was convinced that he had lost his marbles years earlier. That was a problem.

The will he wanted to put in place would change who was to receive his wealth. Having no children, his will would divide his wealth among his siblings and nieces and nephews. The particular family members who stood to inherit before the new will was signed were not the same family members who stood to inherit afterwards.

John had a house, farmland, investments, and life insurance. His estate would be worth a lot of money. More than enough to money to fight over after his death.

His memory was failing. His doctors were aware of it, and dementia had been diagnosed.

It was a recipe for disaster. There was a real possibility that some of his family members would go to court and have his new will declared invalid.

John hired a lawyer to help with his will – one that knew how to draft a will protected against court challenge. She met with him twice. One of the meetings lasted a full 90 minutes. She talked to his doctors and collected medical evidence. She asked John all of the right questions, and made detailed notes in the file she opened to document the preparation of his will. She kept that file in storage waiting for the inevitable fight at his death.

It was a good thing she did. After he died, the family went to war. The lawyer testified with the file in her hand, and was able to use it while giving detailed and comprehensive evidence to support the validity of the will. John’s will withstood the attack and was declared valid.

The lawyer had taken all of the steps necessary to “bullet-proof” the will. When the attack came, all of the evidence necessary to prove that John had capacity was ready to hand. A judge was able to conclude that while John suffered from diminished mental capacity, he retained enough of his marbles to sign a new will.

John’s story is a true one. The details are taken from the published decision of the Alberta court that confirmed the will in 2007. John’s name has been changed to protect his family from embarrassment.

Wills are set aside all of the time.

Here is the recipe for a failed will. The will is done at the last minute, after the person is old and sick and

infirm. The family member who stands to gain from the new will either writes the will, or finds and brings in the lawyer. If a lawyer is brought in, the lawyer does a slipshod job – the wrong questions, no notes, no enquiries of medical staff. The will changes who gets the wealth, and someone is left with no inheritance under the new will.

After the person dies, the family members who are disinherited hire a litigation lawyer to try to overturn the will. The family members hoping to defend the will hire a lawyer of their own, and then scramble around looking for evidence that might be used to defend the will.

Everyone is shooting in the dark. No evidence was collected when the will was drafted and signed. It is up to the family members defending the will to prove it is valid. They are the ones who have to produce enough evidence to satisfy a judge. If there is insufficient evidence, the will fails.

There is no shortage of lawyers willing to attack a will under those circumstances. Many lawyers are willing to do so under a contingency fee arrangement. Under a contingency fee, the lawyer gets paid a fee based on a percentage of the money he or she successfully collects from the estate. They only get paid if there is a successful result. Because most wills are not bullet-proofed, some lawyers enjoy a pretty good track record in successfully overturning wills as invalid. Fees based on a percentage can be substantial.

None of this means that a person cannot make a will at the last minute when they are already starting to suffer from diminishing mental capacity. They can. It just has to be done right. That means bullet-proofing the will. Some estate plans need armour plating.

The key in bullet-proofing a will is to collect all of the evidence when the will is prepared to prove its validity later. That assumes that the will-maker has the capacity to sign a new will in the first place. No marbles, no will.

Next month’s column: Beware of frivolous estate litigation.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Very little is known about the Reverend John Gwyon, but a great deal is known about his estate plan – one of the most bizarre forays into succession planning known to English legal history.

Reverend Gwyon made his will on May 25, 1912, in the shadow of World War I. His will dedicated the whole of his fortune to the establishment of a foundation. That foundation was to exist for the sole purpose of providing boys who were resident of the Farnham district of England with one new pair of knickers each year.

Also known as knickerbockers, knickers were a form of short pants gathered just below the knee. To be eligible for a pair of knickers from the foundation a boy had to be between the ages of ten and fifteen. To get a replacement pair, the boy had to turn in the old pair. Money from the foundation was to be used for “no other purpose whatsoever, whether educational or otherwise.”

We can only speculate as to what the Reverend John Gwyon was thinking. We can presume he was a bachelor.

Not being content to leave his curious and questionable legacy unrefined, he then amended his will five times over the ensuing six years.

Fearful that he might not have been specific enough, his first amendment declared that the word knickers meant “ordinary strong and durable knickers such as were worn by boys every day, but no sporting or fancy knickers of any kind such as football knickers, cricket knickers, military knickers, boy scout knickers, etc.”

Worrying that the trustees of the foundation might be diverted from their work by war or other calamity, his second amendment made it clear that “in case of extreme national or local distress, cause, emergency, or other reason whatsoever the foundation should never be diverted by the trustees on the application of any person or public body to the relief or on account of such distress, emergency, cause or reason, but should always be applied as specified for boys only….” It was knickers or nothing.

Mindful of the lasting mark he felt he was about to make, his third amendment stipulated that the foundation should forever remain unchanged and dedicated in his name as the “Gwyon’s Foundation for Clothing Boys.”

Making what he would have viewed as an important policy concession, his fourth amendment declared “that each successful boy… might, if he desired, choose a pair of trousers instead of kickers.”

Becoming more and more liberal in his largesse, his fifth amendment directed that the benefits of the foundation created under his will “should not only extend to the district…but should also extend to the points three miles or so outside of the boundary.”

Having perfected his plans he left the will untouched over the ensuing twenty years until his death in 1928.

His will was challenged in court. Five lawyers wrangled in court for three days. A substantial sum of money was in dispute – John Gwyon had been wacky but wealthy. At the end of those three days a judge ruled that the will failed and “Gwyon’s Foundation for Clothing Boys” never got off the drawing board.

Hidden and almost totally obscured in the bizarre detail of John Gwyon’s estate plan and the court case that followed is an obscure legal lesson about the law of trusts. The case is still taught in law schools. Generally speaking, a trust cannot be set up to further a purpose unless the purpose can be characterized as charitable. The judge concluded that Reverend Gwyon had not been motivated by charity.

There is a more practical lesson to be learned. With a few wording changes to make the purpose more clearly charitable, the trust would have been upheld. John Gwyon almost succeeded in making his mark.

What about you? Your estate plan can be an excellent way to make a mark in the community. You can support your old school matter, relieve against child poverty, support the arts, or pursue any manner of other charitable end. You can go it alone, like Gwyon, or get appropriate help. The very wealthy set up private foundations. For persons with less wealth, they can approach organizations like The Calgary Foundation. The staff there can help you set up a fund, and define the charitable benefit you would like to confer on the community. The Foundation structure ensures you stay on track, and don’t go afield.

Next week’s column: An estate planning lesson from Napoleon.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Gerald Anderson was a successful dairy farmer but an unsophisticated businessman. He was in charge of the cows and the milk. His wife, Mary, was in charge of the business side of things. She made business decisions, signed cheques, and paid the taxes. The farm thrived.

Gerald and Mary had six children – two sons and four daughters. The two sons worked with their parents on the farm. So did one of the daughters, Loreen. The couple’s estate plan was simple. The sons would each get half of the farm. The daughters, including Loreen, would get life insurance money.

Was the estate plan fair? Loreen spent fifteen years working in the family farm operation alongside her brothers. She felt that she deserved a part of the farm too. Her parents did not see it that way. Loreen was paid a salary for her help on the farm. Her brothers shared in profits, if any – in lean years they would take a beating financially. She had worked on the farm for fifteen years. Her brothers had worked on the farm for their entire adult lives. For better or worse, Loreen was always treated by her parents as an employee, not an owner.

The whole family knew the parents’ plan. While Loreen may have been irked, she did not challenge them – at least not while her mom was alive.

Her mother died in 2001 and Loreen swung into action.

Her father, Gerald, was seriously ill with a terminal disease at the time. He had trouble walking. He could not speak clearly or easily. It looked like Gerald would be following his wife into the grave — quickly.

Loreen invited him for dinner. When he got there, he was met by four people, two documents, and a pen. The dinner guests included Loreen, a commissioner of oaths, and persons to serve as witnesses. On the table were two transfers of land. It turned out to be less of a dinner party and more of a give away the farm party.

The effect of the transfer documents was to place a significant portion of the farmland in joint names with Loreen. Gerald and Loreen would be on title as “joint tenants.” That meant that as soon as Gerald died, Loreen would be able to ask the land titles office to put the land in her name alone. Voila – half the farm for her.

Gerald’s will had been drafted and signed earlier, when he was healthy and had his wife at his side acting as his business partner. The will would have passed the farmland in question to one of his sons, Donald. Loreen’s plan was designed to change that.

Joint tenancy passes land directly to the surviving co-owner when the first co-owner dies. The land never goes into the estate. Since the land that was jointly owned with Loreen would not form part of Gerald’s estate, Loreen understood that the land would not be governed by his will.

After Gerald passed away, Loreen invited her brother Donald over for a coffee date. It turned out to be less a coffee date and more of a get your farm equipment and livestock off of my land date.

Donald did not say a word to his sister when she told him he was no longer a farmer. He quietly set his coffee cup down and walked out of her house.

He walked from her house and into a lawyer’s office.

Donald and his lawyer sued Loreen for ownership of the farmland that would rightfully have been his under the will. Donald won the court case.

The law that applies to joint tenancy was trickier than Loreen thought. When a parent places land in joint tenancy with an adult child, a “legal presumption of resulting trust” operates. The court assumes that the child holds the land in trust for the persons who would have inherited it under the will. That meant that Loreen had to override that assumption by proving to the judge that her dad intended that she keep the land for her own. She failed.

The judge also concluded that Gerald did not know what he was signing that day. His daughter had misled Gerald. Further, he was sick and weak, and would have signed anything Loreen put in front of him.

In the end result, Donald got the farmland back. Loreen kept her share of the insurance money. We can assume that she lost her job on the family farm.

The saga of Gerald, Loreen and Donald is a true one. All of the sad details are taken from the published decision of the Alberta court that heard the case. The names have been changed to save the family embarrassment.

Next week’s column: the knickerbockers trust, a bizarre foray into the law of trusts.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for legal advice.

Jeff Nelson had a responsible position with the police department. He had a daughter, named Karen, before separating from his wife in 1980. Jeff never remarried. Karen was his only child.

The divorce that followed was not amicable. He had access rights, but visits were strained. After Karen turned 19 she saw little of her father over the decade that followed.

He may have been estranged from his daughter, but he was close to his sister. He saw his sister each Christmas, and on summer vacations. They visited regularly, and talked on the phone weekly. For all intents and purposes, his sister was his only family.

Jeff turned his mind to estate planning in 2003. Not surprisingly, he made his sister his sole heir at the time. His chief assets were a life insurance policy and a pension plan. He signed a beneficiary designation that named his sister as the beneficiary under his life insurance policy. That meant that the cash payment under the policy would go to his sister upon his death.

He took ill in July of 2004. His sister grew worried, and came to visit him, discovering her brother could not eat, or even hold a plate. She took him home, installed him in her guest room, and arranged to take him to the doctor.

A CAT scan revealed that Jeff had cancer in both his lungs and brain. He was given two weeks to live and admitted into hospital.

Jeff signed a power of attorney while he was in the hospital appointing his sister to handle his financial affairs– a detail that would later haunt her.

Jeff’s sister contacted Karen, his daughter, and brought her to the hospital. After years without any form of relationship, Jeff and Karen put aside their differences. Father and daughter were reconciled. Terminal illness will often do that.

Jeff enjoyed a brief period of remission. He left the hospital on September 28th 2004 and went back home. The doctors now gave him three to six months to live.

After he left the hospital, he discovered that his sister had withdrawn a total of $4,375.91 from his bank accounts. Rightfully or wrongfully, he concluded that his sister had been stealing from him. He was sick and may not have been thinking clearly. Unfortunately, terminal illness will also do that as well.

His sister denied any wrongdoing. Jeff was not convinced. He wanted the police to charge her with theft.

Jeff decided to disinherit his sister. He signed a new will, leaving everything to his daughter Karen. He signed papers to make the death benefit on his pension pay out to Karen. It is absolutely clear that he intended to have all of his wealth go to his daughter at his death and have none of it go to his sister.

He missed his life insurance. It was still payable to his sister. To change that he would need to sign a beneficiary designation appointing his daughter as the beneficiary under the policy. That did not happen.

Jeff Nelson died on December 28, 2004 at the age of 51, three days after Christmas and four months after being told he had two weeks to live.

The life insurance company gave his sister a cheque for $90,386.03. His daughter sued and claimed that money as her father’s sole intended heir.

The court sided with the sister. Since Jeff had not signed a new beneficiary designation in favour of his daughter Karen, the old one in favour of his sister still governed. Case closed.

In a lot of ways, Jeff’s story is a sad one. It culminated with a sad little estate planning error. It is surprising how often life insurance goes to the wrong person. It falls through the cracks during estate planning.

This frequently happens after a divorce. The divorced person dies and only then is it discovered that they never thought to change the beneficiary under their life insurance. It goes to their ex-spouse. Sometimes that is OK. More often than not, however, it is absolutely not what the deceased would have intended — you can imagine them spinning in their grave.

Life insurance is flexible. It is easy to change a beneficiary designation. It can be done on a form provided by the insurance company. It can be done in the body of a will. It can be done less formally, with a pen on a piece of note paper. It just has to be done.

Is the beneficiary designation under your life insurance policy up to date?

Jeff’s story is real, taken from the published decision of the court that heard the dispute. Names and some details have been changed to save the family embarrassment.

Next week’s column: More about life insurance.

John Poyser practices as a wills and estate lawyer with The Wealth and Estate Law Group (Alberta). A former chair of the Wills, Estates and Trusts Section of the Canadian Bar Association, he co-authors a textbook for lawyers and accountants on trust and estate taxation. Contact him at (403) 613-2128 or jpoyser@welglawyers.ca , or visit www.welglawyers.ca

© John E. S. Poyser 2009.

This article was current when it was written. No effort has been made to update it. It is not a replacement for

legal advice.