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Sameness and Change Respecting Unmarried Cohabitants

2 STEP Inside • MAY 2013 • VOLUME 12 NO. 2

STEP Inside

EDITORIAL BOARD

Bernadette Dietrich

Paul Festeryga

Joyce Lee

Barbara Novek

Marina Panourgias

STEP Inside is published three timesa year by the Society of Trust andEstate Practitioners (Canada), anorganization of individuals from thelegal, accounting, corporate trustand related professions who areinvolved, at a specialist level, withthe planning, creation, managementof and accounting for trusts andestates, executorship administra-tion and related taxes. STEP Canadahas Branches in Vancouver, Calgary,Edmonton, Winnipeg, Toronto,Ottawa, Montreal and the Atlanticregion.

Articles appearing in STEP Inside donot necessarily represent the poli-cies of STEP Canada and readersshould seek the advice of a suitablyqualified professional before takingany action in reliance upon the infor-mation contained in this publica-tion.

All enquiries, comments and corre-spondence may be directed to:

STEP CanadaOne Richmond Street West,

Suite 700Toronto, ON, M5H 3W4

www.step.ca

Tel 416-491-4949 Fax 416-491-9499

E-mail [email protected]

Copyright © 2013 Society of Trustand Estate Practitioners (Canada)

ISSN: 14960737

Distinguished AchievementsEach year, STEP Canada recognizes the achievements of the four studentswho achieve the highest marks in each of the STEP Canada Diploma Coursesand the student who achieves the highest mark in a Qualified PractitionerEssay. Awards will be presented to these students during the National Con-ference in June. Please join us in congratulating the following students ontheir accomplishments in 2012!

2012 Highest Mark, Law of Trusts Course

Katy Basi, LLB: Barrister and Solicitor, TorontoKaty's practice focuses on wills, trusts, estate planning, andestate administration. Prior to opening up her own prac-tice, she worked for many years with a large firm specializ-ing in income tax and probate tax.

2012 Highest Mark, Taxation of Trusts and Estates Course

Jody Hatto, CA: Manning Elliott LLP, VancouverJody is a Senior Manager in the Tax Department and her practicehas several areas of focus: individual tax, tax issues for owner-managed businesses, estate tax, and expatriate tax issues.Jody also serves on STEP Canada’s national Student Liaison Committee.

2012 Highest Mark, Wills, Trust and Estate

Administration Course

Michelle Desrosiers, SFC, PFP: Scotiatrust, WinnipegMichelle is the Trust Branch Manager with Scotiatrust. Beforejoining Scotiatrust, she held various roles within Scotiabankover 25 years. She guides clients through any challenges thatthey may encounter in trusts and estates. Michelle also serveson STEP Canada’s national Student Liaison Committee.

2012 Highest Mark, Trust and Estate Planning Course

Natalie Malech, CA: Western Financial Group, CalgaryPrior to joining Western, Natalie was a Senior Tax Managerwith Catalyst LLP providing tax assistance and planning forindividuals, owner-managed business, non-profit corpora-tions and trusts. Natalie was also the 2010 recipient for the Highest Mark, Law of Trusts Course.

2012 Highest Mark, Qualified Practitioner Essay

Jennifer Tokarek, CA, TEP: TD Wealth Advisory Services,VancouverJennifer is a Regional Tax Manager. As part of the WesternCanada Tax Services team, she provides personal, trust, estateand corporate tax services to clients. Jennifer is the inaugural recipient for her essay Beware of the US “Foreign” Trust Rules!

Christine Van Cauwenberghe, Chair

An increasing number ofpeople are turning to special-ists in the trust and estate

industry to ensure that wealth istransferred smoothly between gener-ations. With today’s complex familystructures and multijurisdictional sit-uations, no one is better equipped tohandle this task than a trust andestate practitioner (TEP). The interna-tionally recognized TEP designationgives clients confidence that they arereceiving the best possible advice.

STEP Canada launched the STEPdiploma in September 2010, and thefirst students to complete the programgraduated in the summer of 2012. TheSTEP diploma was originally based oncourses offered by STEP Worldwide, butit immediately became apparent thatCanadian practitioners required mate-rials relevant to them. As a result, theprogram was written and developedby Canadians, for Canadians. The Edu-cation Committee is composed of prac-titioners from various disciplines acrossCanada – lawyers, accountants, finan-cial planners, insurance advisers, andtrust officers – which has resulted ina program different from any offeredby other professional bodies. Thediploma consists of four courses:

• law of trusts;• taxation of trusts and

estates;• wills, trust, and estate

administration; and• trust and estate planning.

Unlike the experienced practi-tioner route or the qualified prac-titioner route, the diplomaprogram does not require stu-dents to have a professional des-

ignation to enrol, making it an excel-lent way for individuals new to theindustry to obtain the education nec-essary to serve clients well. Advis-ers who have been practicing for manyyears will also find the program ben-eficial if they intend to specialize intrusts and estates. The courses involveindependent study, and a large binder

of materials written by experts is pro-vided for each course. Case studiesare incorporated into the fourth andfinal course to emphasize the practi-cal nature of our work. Students haveaccess to tutorials and must pass anexamination at the end of everycourse. Many students have set upstudy groups to help each otherduring the program. Examinations arewritten twice annually in major cen-

tres across Canada.

On earning the STEP diploma and sat-isfying the other membership require-ment (two years’ experience workingin trusts and estates), graduates qual-ify for admission as full members ofthe society and are entitled to use theTEP designation. Enrolment in the pro-gram has now expanded to 237 stu-dents from across the country; thisrepresents an increase of 338 percentsince 2010. The program is rigorous,and experience has shown that noteveryone completes it, so studentsmust approach the work seriously. Thecourse can be finished within two tofour years. In keeping with the highstandards of STEP, the STEP diplomaprogram is designed to ensure that allfuture STEP members will be highlyknowledgeable in their field.

The STEP Canada diploma programis the best choice for practitioners whowant to establish themselves as spe-cialists in the trust and estate indus-try. Our student community includesprofessionals from accounting, law,financial planning, banking, insurance,and academia. If you or someone youknow is interested in taking thediploma program, please go to theSTEP website for more information:http://www.step.ca/joining/student/diplomaroute/diplomaRoute.asp n

STEP Inside • MAY 2013 • VOLUME 12 NO. 2 3

The STEP Diploma: A Unique Canadian Offering

The STEP Canadadiploma program is the best choice forpractitioners who wantto establish themselvesas specialists in thetrust and estate industry.

STEP Canada wouldlike to acknowledge our

graduates to-date from theCanadian Diploma and

Qualified Practitioner programs.Please join us in congratulating

these individuals on theiraccomplishments!

Tony Banik, TEP: Saskatoon, SKNathan Bender, TEP: Toronto, ONMatthew Bird, TEP: Toronto, ONNorman Bowley, TEP: Ottawa, ONLisa Bursey, TEP: Guelph, ONTim Brisibe, TEP: Calgary, ABKathryn Charr, TEP: Edmonton, ABWinston Chow, TEP: Calgary, ABChristine Cooke, TEP: Woodstock, ONNgoc Day, TEP: Vancouver, BCDan Derhy, TEP: Montreal, QCRoberto Domagas, TEP: Calgary, ABSunita Doobay, TEP: Toronto, ONAmy Francis, TEP: Vancouver, BCDale Franko, TEP: Calgary, ABLeona Harari, TEP: Montreal, QC

Adam Hoffman, TEP: Calgary, ABAndrew Kruczkowski, TEP: Toronto,

ONAileen LaBorie, TEP: Vancouver, BCChang You Li, TEP: Surrey, BCBeatrice Lipman, TEP: Calgary, ABMouyleng Ly, TEP: Toronto, ONKellie MacIntyre, TEP: Calgary, ABNatalie Malech: High River, ABChristine Mann, TEP: Yellowknife, NTDonald Moir: Richmond, BCRalph Neate, TEP: Collingwood, ONThierry Ntumba: Toronto, ONGayle Pederson, TEP: Edmonton, ABChris Reid, TEP: Gibsons, BCJason Rideout, TEP: St. Stephen’s, NBSusannah Roth, TEP: Toronto, ONFarha Salim, TEP: Calgary, ABMichael Samotis, TEP: Montreal, QCBrenda Lee Scott, TEP: Nine Mile

River, NSCampbell Stafford, TEP: Vancouver, BCJason Stephan, TEP: Red Deer, ABDawn Tipton, TEP: Victoria, BCJennifer Tokarek, TEP: Vancouver, BCBonnie Yashinsky: Thornhill, ON


“I recommend the diploma route for individuals pursuing their TEP designation regardless of their educational or professional

background. The diploma materials are practical and integrate subjectmatter from a full range of disciplines directly relevant to individuals

working with trusts and estates. The materials are presented effectivelyand efficiently. Individuals in the early stages of their careers will find the

courses very insightful; people who have done time in the trenches willfind that the program will fill in knowledge gaps they didn't even know

they had. Employers can be confident that students who go through thediploma program will be exposed to topics on an integrated basis, giving

them a broader perspective and knowledge base from which to identifyissues and opportunities for clients.” – TEP practitioner testimonial

ROBERT LECKEYAssociate Professor and WilliamDawson Scholar, Faculty of Law andPaul-André Crépeau Centre forPrivate and Comparative Law,McGill University

In a high-profile decision, theSupreme Court of Canada hasrejected a challenge to family law’s

differential treatment of married andunmarried couples. Although itaffirmed the status quo, the judgmenthas implications for practitioners oftrusts and estates.

A Loss for Lola in a SharplyDivided DecisionIn Quebec (Attorney General) v. A, 2013SCC 5, the Supreme Court upheld theconstitutional validity of Quebec’s dis-tinct approach to unmarried cohabi-tants. In every other province, the lawof spousal support extends to cohab-itants; in several provinces, so do pre-sumptions for sharing family propertyon relationship breakdown or death.By contrast, Quebec’s law does not sub-ject unmarried cohabitants to any of

the rights and duties of marriedspouses. A majority of the court hasnow rejected the claim that Quebec’srestrictive approach discriminatesunjustifiably against cohabitants onthe basis of marital status and thusviolates the Canadian Charter ofRights and Freedoms.

Subject to a publication ban on theparties’ names, the case becameknown as Eric v. Lola. It owes its pro-file to the high stakes. For one thing,the former cohabitant opposing theCharter claim was a Quebec billion-aire. For another, more than one-thirdof couples in Quebec are unmarried.A finding of unconstitutionality wouldthus have had far-reaching effects.Finally, such an outcome might haveundermined the restrictive applicationof matrimonial property regimes inseveral common-law provinces.

In a decision spanning more than400 paragraphs, the judges dividedon several issues. Abella J and fourcolleagues held that Quebec’s exclu-sion of unmarried cohabitants fromthe protections of family law discrim-inated against them. This group of

judges overruled the discriminationanalysis in Nova Scotia (Attorney Gen-eral) v. Walsh, 2002 SCC 83, [2002] 4SCR 325, a judgment that had upheldthe exclusion of cohabitants fromNova Scotia’s matrimonial propertyregime on the basis that it affirmedtheir choice and autonomy. Of the five

judges who made up a majority infinding discrimination, only Abella Jviewed the limit on cohabitants’ equal-ity rights as wholly unjustifiable undersection 1 of the Charter. Deschamps Jand two other judges distinguishedthe division of property from the lawof support. In their view, only the


Sameness and Change Respecting Unmarried Couples

In a high-profiledecision, the Supreme

Court of Canada hasrejected a challenge tofamily law’s differential

treatment of marriedand unmarried couples.

exclusion from spousal support wasunjustifiable and thereby unconstitu-tional. The fifth judge, McLachlin CJ,exercised the swing vote. Sheaccepted the entire legislative policyas reasonably justifiable and in con-

formity with the Charter, and shealigned her views with those of LeBel Jand three other judges. The lattergroup upheld the law on the basis thatexcluding cohabitants entirely fromthe rights and obligations of formalspouses conformed with the Charter’sright to equality. These judgesapproved the government's stated aimof respecting cohabitants’ autonomyand freedom of choice.

Practical ImplicationsThe court’s recent judgment shedslight on three avenues by which thelaw relating to cohabitants may con-tinue to develop.

First, concerning constitutional lit-igation, the decision suggests that fur-ther legal change via a Charterchallenge is unlikely. The comfort ofa majority of judges with Quebec’stotal exclusion of cohabitants fromthe rights and duties of marriedspouses hints that the more piecemealeffects of cohabitation in otherprovinces are unlikelier still to runafoul the Charter.

Second, practitioners should keepan eye on legislative reform. Somecommentators had understood thecourt's decision in Walsh as removing

the impetus for legislative enlarge-ment of cohabitants’ rights and duties.But British Columbia’s recent FamilyLaw Act assimilates cohabitants intothe class of married spouses for thepurposes of property division. And

it does so in the absence of any obli-gation under the Charter. Moreover,in the wake of the court’s recent deci-sion, Quebec’s minister of justiceacknowledged the possibility of leg-islative reform. Further legislativeaction cannot be ruled out.

Third, the judgment’s greatest prac-tical impact may be to intensify thefocus on private-law litigation. It con-firms the abiding significance of theSupreme Court's leading decision onunjust enrichment in the context ofcohabitation, Kerr v. Baranow, 2011SCC 10, [2011] 1 SCR 269, and itselaboration by lower courts. Somecommentators predict that, in ordi-nary cases, Kerr will call for an equalsharing of the parties’ gains duringcohabitation.

In particular, the failure of reformvia the Charter may increase the pres-sure on Quebec judges to adapt theiraustere approach to former cohabi-tants’ claims. Quebec civil law providesthat unjust enrichment generates adebt under the law of obligations. Butthere is no proprietary remedy suchas a constructive trust. Moreover,judges insist that unjust enrichmentis not a device for sharing profitsamong cohabitants. Will the judges

find a way to integrate Kerr, acommon-law decision, into Quebeccivil law?

Furthermore, the Supreme Court’srecent decision on the Charter ques-tion is unlikely to hamper claims underthe private law. Indeed, it may easethem. The reason is that the major-ity of the judges who found discrim-ination highlighted the functionalsimilarity of cohabitants to marriedspouses. By contrast, the earlier judg-ment in Walsh had figured in someunjust enrichment cases as a basis forrestraint. The majority in that decisionhad highlighted cohabitants’ differ-ences from married spouses and thesignificance of the choice not to marry.

The renewed focus on claims ofunjust enrichment among cohabitantssignals the importance of advanceplanning on the part of clients. In alljurisdictions, an enforceable domes-tic contract may count as a legalreason to reject an unjust enrichmentclaim. That being said, a contract thatis unconscionable or otherwise unen-forceable will not.

More speculatively, might judgesbe especially open to claims madeagainst an estate following cohabi-tation? Such claims may be framed inunjust enrichment or brought underlegislation providing for the variationof wills. The autonomy-based con-cerns that extending rights and obli-gations to cohabitants would imposean unchosen status might seem lessapplicable where the respondentspouse is deceased.

Changes to the law applicable toclients who live in unmarried cohab-itation remain foreseeable. What theSupreme Court of Canada has told usis that they won't arise from Charterlitigation. n


The renewed focus on claims of unjustenrichment among cohabitants signals theimportance of advance planning on the part ofclients. In all jurisdictions, an enforceabledomestic contract may count as a legal reason toreject an unjust enrichment claim. That beingsaid, a contract that is unconscionable orotherwise unenforceable will not.

Kim and Pat are an unmarriedcouple who have been livingtogether for the past eight

years. They have heard that theSupreme Court of Canada recentlyissued a ruling about the rights ofcommon-law couples and are uncer-tain how it will affect their situation.They have two children under the ageof five and are concerned about thewelfare of both the surviving part-ner and the children. Their assets areas follows:

Real Property• Home registered in Kim’s name:

$700,000

Registered Retirement SavingsPlans (RRSPs) • Kim: $50,000

Pat designated as the directbeneficiary

• Pat (Spousal RRSP): $20,000Kim designated as the direct beneficiary

Business AssetsShares of Westco Supply Ltd held byKim: $1,500,000

Insurance• Kim

Death benefit $750,000Cash surrender value $150,000No direct beneficiary designated

• PatDeath benefit $250,000Cash surrender value $50,000No direct beneficiary designated

Registered Education SavingsPlans• Kim is the subscriber on both of

the following plans:

Plan 1, Sebastien (age four) listedas beneficiary: $10,000Plan 2, Stella (age two) listed as beneficiary: $5,000

Neither Kim nor Pat has a will or apower of attorney, and the couple hasnever signed a cohabitation agreementor registered a formal civil union ordomestic partnership with any gov-ernmental body. Kim has run a suc-cessful business for many years andas a result has acquired the majorityof the family’s assets. Pat quit his jobto raise the couple’s children and as aresult has become financially depend-ent on Kim. He therefore is particu-larly concerned about the legalimplications of Kim’s death.

THE PRAIRIE PERSPECTIVEChristine Van CauwenbergheAssistant Vice-President, Tax &Estate Planning, Investors Group;Member, STEP Winnipeg

The rights of a surviving common-lawpartner are similar in Manitoba andSaskatchewan. Unlike common-law part-ners in many of the eastern provinces,surviving partners in Manitoba andSaskatchewan enjoy many of the samerights as surviving married spouses.

MANITOBAIn Manitoba, if a common-law partnerdies without a will, the surviving part-ner is entitled to inherit as a surviv-ing spouse either if the relationshipwas registered under The Vital Statis-tics Act or if the couple cohabited ina conjugal relationship for at leastthree years or for at least one yearwhile raising a child together. In Man-itoba, if Kim died without a will, Pat

would receive the entire estate. HadKim been survived by children whowere not also Pat’s children, Pat wouldreceive the greater of $50,000 or one-half of the estate plus one-half of theremainder. If Kim had both a spouseand a common-law partner at the timeof her death, the person who wasliving with Kim at the time of her death(or who was last living with her) wouldinherit the amounts referred to above,and the other person would receivepart of the estate only if he had an out-standing claim for a division of familyproperty relating to his relationshipwith Kim. In certain cases, separatedcommon-law partners may receivenothing in the event of intestacy.

If Kim died with a will that failed tomake adequate provision for Pat, Patmight be able to apply for an equal-ization of family property under TheFamily Property Act (if the couple hadregistered their relationship or cohab-ited in a conjugal relationship for atleast three years), or he might makea dependant’s relief application. Tosucceed under The Dependants ReliefAct, Pat must prove financial need.If the couple had been living togetherin a common-law relationship at thetime of Kim’s death, Pat must alsoprove either that he had lived with Kimfor the three years preceding her deathor that he was being paid or was enti-tled to be paid maintenance and sup-port by Kim under an agreement ora court order at the time of her death.For the purpose of making a depen-dant’s relief application, a “common-law partner” includes not only aperson who registered his or her rela-tionship with the deceased or whocohabited with the deceased for atleast three years but also a person


Death of a Common-Law-Partner

who cohabited with the deceased forat least one year and parented a childwith the deceased. Because of his cir-cumstances, Pat would be able to seekrelief under both statutes.

SASKATCHEWANIn Saskatchewan, if Kim died with-out a will, Pat would be entitled toinherit as a surviving spouse if hecohabited with Kim continuously fora period of not less than two yearsand either was cohabiting with Kim atthe date of her death or had separatedfrom her within two years of the dateof her death. In Saskatchewan, pur-suant to The Intestate Succession Act,1996, if a common-law partner dieswithout a will, the survivor receivesthe first $100,000 of the value of theestate plus a portion of the remainder,depending on the number of childrenthat the deceased had. Pat wouldreceive $100,000 plus one-third of theestate since Kim was survived by morethan one child. If a common-law part-ner dies leaving both a spouse and acommon-law partner, the spouseinherits the “spouse’s share,” unless itcan be shown that the spouse had leftthe deceased and was cohabiting withanother person in a spousal relation-ship at the time of the intestate’sdeath. In certain cases, separated part-ners may receive nothing on intestacy.

If Kim dies with a will which doesnot make adequate provision for Pat,Pat may be able to make a claimagainst the estate for a division offamily property since they had cohab-ited continuously for a period of notless than two years pursuant to TheFamily Property Act. A survivingcommon-law partner can also make adependant’s relief application if thecouple cohabited continuously for aperiod of not less than two years, orwere in a relationship of some perma-nence and they were the parents ofa child, so in this case, Pat would beable to make a claim.

Unmarried couples in Saskatchewan

should also be aware that pursuantto The Wills Act, 1996 if a common-law partner currently has a will whichwas written on or after November 1,2001, it will be rendered void oncethey have lived together in a conju-gal relationship for a period of twoyears, unless the will was drafted incontemplation of the relationship. Anywills signed by individuals prior toNovember 1, 2001 who were livingin a common-law relationship willcontinue in effect, meaning that anestate could go to a separated spouse,if the separated spouse is still theperson indicated in the will as beingentitled to the estate.

THE BRITISH COLUMBIAPERSPECTIVEAmy FrancisPrincipal, Legacy Tax + Trust Lawyers;Member, STEP Vancouver

The rights of a surviving common-lawpartner in British Columbia are gener-ally very similar to the rights of a sur-viving married spouse.

Under the BC Estate AdministrationAct, surviving common-law spousesare entitled to the same range of rightson intestacy as surviving marriedspouses. A “common law spouse” isdefined as a person who has lived andcohabited with another person in amarriage-like relationship for a periodof at least two years immediatelybefore the other person’s death. There-fore, if Kim predeceased Pat, Pat wouldbe entitled to a life estate in the home,all household furnishings, a firstcharge on the estate for $65,000, plusone-third of the remaining residue ofthe estate. The remaining two-thirdsof the residue would be held for thebenefit of Kim and Pat’s minor childrenuntil they reach the age of majority.Kim’s registered retirement savingsplans would be payable to Pat andwould not pass through Kim’s estate.Because Kim has not designated a ben-eficiary under her life insurance policy,

the death benefit would be payable toher estate and therefore subject to thedivision of residue under the EstateAdministration Act.

If Kim or Pat had left a will that failedto make adequate provision for theother, the survivor would have stand-ing as a surviving spouse to bring aclaim for a variation under the Wills Vari-ation Act. Common-law spouses havestanding equal to that of marriedspouses under this Act. The criteriarequired to have standing as a common-law spouse under the Wills VariationAct are substantially similar to the cri-teria in the Estate Administration Act,although there is no requirement in theWills Variation Act that the two-yearcohabitation period occur immediatelybefore the death of one of the spouses.

Despite the equal standing of mar-ried and common-law spouses underthe Wills Variation Act, the courts havenot analyzed the entitlement ofcommon-law spouses to a share oftheir deceased partner’s estate in quitethe same way as they have analyzedthe entitlement of married spouses– at least not to date. In analyzing aspousal claim under the Wills Varia-tion Act, one factor that a court con-siders is what the spouse would havereceived under family law legislationif the marriage had broken downimmediately before the deceased’sdeath. Until March 18, 2013, BC familylaw distinguished between the prop-erty rights of married spouses and theproperty rights of common-lawspouses on marriage breakdown.Therefore, until very recently, surviv-ing common-law spouses with a claimunder the Wills Variation Act wereunable to argue that the deceasedspouse had a legal obligation to leavethem a significant share of propertyon death. (It was, however, open tocommon-law spouses to argue thattheir deceased spouse had a moralobligation to leave them a significantshare of property.) The Family LawAct’s extension of full division-of-prop-


erty rights to common-law spouseson the breakdown of a relationship islikely to increase awards made to sur-viving common-law spouses under theWills Variation Act, bringing themmore in line with the amountsawarded to surviving married spouses.

For almost four years, the rules ofintestacy and the legislative frameworkgoverning wills and estates generallyin British Columbia have been on thecusp of change. The Wills, Estates andSuccession Act (WESA) received royalassent on October 29, 2009, and itis scheduled to come into force onMarch 31, 2014. WESA replaces,among other statutes, the EstateAdministration Act and the Wills Vari-ation Act. Under WESA, the criteria fora common-law spouse are similar tothe criteria found in the Wills VariationAct insofar as WESA requires a coupleto live in a marriage-like relationshipfor a period of at least two years. Itdoes not, however, require that thetwo-year period occur immediatelybefore the date of death. WESAchanges the intestacy rules. If Kim diedintestate after WESA was in force, Patwould have a charge against the estatefor a preferential share of $300,000plus one-half of the residue of theestate. He would not receive a lifeestate in the spousal home but wouldbe given a first right to acquire thespousal home to satisfy his interest inthe estate. If Kim died after the enact-ment of WESA and her will did not pro-vide adequately for Pat, Pat would havethe same right to seek to vary the willas he had under the Wills Variation Act.

THE QUEBEC PERSPECTIVECaroline RhéaumeDirector at large, STEP Canada;Member, STEP Montreal

A surviving common-law partner hasvery limited rights in Quebec. On Jan-uary 25, 2013, the Supreme Court ofCanada rendered its long-awaited judg-ment in Quebec (Attorney General) v. A,

2013 SCC 5, a case that has becomeknown as Eric v. Lola. Lola had arguedthat the articles of the Civil Code ofQuébec (the Code) that provide certainprotections for married andcivil union spouses on thebreakdown of their rela-tionships are discrimi-natory because theydo not apply toc o m m o n - l a wspouses. Thecourt agreedwith Ericin uphold-ing theconstitu-t i o n a lvalidity ofthe exist-ing treat-ment ofcommon-law spouses in Quebec.

In Quebec, if a common-law part-ner dies without a will, the survivingpartner is not entitled to inherit underthe Code, even if the spouses cohab-ited in a conjugal relationship for along time. In addition, common-lawspouses cannot include testamentaryprovisions in a cohabitation agree-ment. The Code stipulates that a giftmortis causa is null unless it is madeunder a marriage or civil union con-tract. If a deceased dies without a will(and there is no married spouse), theentire succession devolves to thedescendants. Therefore, if Kim diedwithout a will, the two children wouldreceive her entire estate. A benefici-ary designation under a registeredretirement savings plan (RRSP) is gen-erally not recognized in Quebec unlessthe RRSP is bought from a life insur-ance or trust company. If Kim had botha married spouse (if, for example, shewas separated but not divorced) anda common-law partner at the time ofher death, the married spouse wouldreceive one-third of the successionand her children would receive theother two-thirds.

Several provincial and federal laws,particularly those relating to pensionbenefits, may offer some protectionto surviving common-law spouses. Forexample, under An Act Respecting theQuébec Pension Plan, a common-lawspouse can receive benefits on thedeath of his or her spouse if certainconditions are met. The right toreceive benefits generally depends onthe duration of the relationship (oneor three years) or whether a child wasborn from the relationship or adoptedby the common-law partners.

Because there are no direct benefi-ciaries under Kim or Pat’s life insur-ance policies, the proceeds would bepaid to the estate. Since a common-law partner cannot inherit if there isno will, the surviving common-lawspouse would not receive the lifeinsurance proceeds.

Following Kim’s death, Pat couldnot receive alimony. However, if hecould prove that Kim was unjustlyenriched at his expense, he couldmake a claim for unjust enrichmentunder the Code. Kim’s estate wouldbe required to indemnify him for hiscorrelative impoverishment in the


absence of justification for her enrich-ment or his impoverishment.

THE ONTARIO PERSPECTIVEKaty BasiSole practitioner; Student Member,STEP Toronto

In Ontario, these facts lead to legalresults that are probably inconsistentwith Pat and Kim’s estate-planningintentions. Common-law partners arenot considered to be spouses for thepurposes of the intestacy rules underpart II of the Succession Law ReformAct (SLRA). While Pat is entitled toreceive Kim’s registered retirementsavings plan (RRSP) as the direct ben-eficiary, he has no automatic claim toany other part of Kim’s estate.

Under part II of the SLRA, Kim’sestate is divided equally between hertwo children, assuming that she istheir biological parent or has legallyadopted them. Because the childrenare minors, the administrator of Kim’sestate needs to address the issuesraised by their minority, including thepossible involvement of the Office ofthe Children’s Lawyer. Pat may needto make a court application to becomethe children’s guardian for property todeal with this concern. Even with Patas their guardian, the children mayhave the right to demand their inher-itance at the age of 18, unless thecourt orders otherwise.

If Pat is neither the biological northe adoptive parent of the children,questions may be raised about thechildren’s custody on Kim’s death.

Pat will likely want to be the admin-istrator of Kim’s estate. Because he

is not a spouse for these purposes, hemay require a number of consentsfrom Kim’s family to obtain the court’sapproval of his appointment. Estateadministration tax (EAT) must be paidon all of the assets of Kim’s estate,except the registered retirement sav-ings plan (RRSP). EAT applies to theproceeds of Kim’s life insurance policybecause there is no beneficiary des-ignation, and to the registered educa-tion savings plans (RESPs) because Patis not a joint subscriber.

Pat has no right to property equal-ization under section 6 of the FamilyLaw Act and no 60-day period of pos-session of the matrimonial homebecause these rights apply to marriedspouses only.

On Kim’s death, her estate becomes

the subscriber of the RESPs by default(assuming that she did not name asuccessor subscriber). If Pat succeedsin his court application to become theadministrator of Kim’s estate, he maygain control over the RESPs, or hemight make a contribution to theRESPs himself, thereby attempting tobecome a subscriber through the backdoor. As noted above, the childrenmay be able to claim their inheritanceonce they turn 18 and cause the RESPsto be terminated early; this wouldresult both in undesirable tax impli-cations and in the required repaymentof government grants.

Clearly, Kim needs to make a will(and preferably dual wills) to addressthe EAT otherwise payable on theshares of Westco Supply Ltd. If Kimdies without a will, Pat has two pos-sible avenues of relief: a dependant’srelief application under part V of the

SLRA and a constructive trust claim. Under part V of the SLRA, spousesinclude persons who 1) have cohabited continuously for

at least three years, or2) are in a relationship of some per-

manence and are the natural oradoptive parents of a child.

The definition of “child” is broader inpart V than in part II because itincludes a person whom the deceasedhas demonstrated a settled intentionto treat as a child of his or her family(which means that Sebastien and Stellaare Kim’s children for the purposes ofpart V, even if Kim is not their biolog-ical parent and has not adopted them).

Under part V, Pat is Kim’s depen-dant and is therefore entitled to makean application for relief. Kim’s $50,000RRSP is likely not “adequate provisionfor the proper support” of Pat, but theamount of relief that a court wouldorder is uncertain, as are the terms ofpayment of the amount. Not surpris-ingly, significant time and expense areassociated with making a dependant’srelief application.

Pat may also be able to make aconstructive trust claim against Kim’sestate, arguing unjust enrichment. Patquit his job to stay home and raisethe children; therefore, Kim hasarguably been enriched because Pat’ssacrifice enabled her to concentrateon expanding her business. Pat wasdeprived, at least monetarily, as aresult of staying out of the workforcefor years. There does not appear tobe any juristic reason for the enrich-ment. Of course, bringing a construc-tive trust claim is an expensive andlengthy process. n


Several provincial and federal laws, particularly those relating to pension benefits,may offer some protection to surviving common-law spouses.

SARA KINNEARDirector, Tax and Estate Planning,Investors Group; Member, STEPWinnipeg

Registered disability savings plans(RDSPs) are designed to helpCanadians with disabilities and

their families save for the future. Cana-dian residents who are turning 59 (orwho are younger) in the year and whoare eligible for the federal disability taxcredit (DTC) may be eligible to open anRDSP. If a disabled individual is turning49 (or is younger), the plan may receivethe Canada disability savings grant andthe Canada disability savings bond.

Since RDSPs came on the market in2008, the government has amendedthe legislation several times; some ofthese amendments are contained inthe 2012 budget and are summarizedbelow.

Temporary Expansion of the Listof Eligible HoldersIf an RDSP is established for an adultbeneficiary before June 29, 2012 orafter December 31, 2016, the disabledbeneficiary must be the sole holder ofthe plan, unless the beneficiary is con-tractually incompetent; in this case,the holder must be “legally authorizedto act on behalf of the beneficiary.” Toobtain authorization generally requiresan application to the courts for anorder declaring that the beneficiary isincompetent and appointing a thirdparty as his or her financial guardian.

If an RDSP is established for anadult beneficiary between June 29,2012 and December 31, 2016 and ifthe RDSP issuer has reasonablegrounds to “doubt” the beneficiary’scapacity, a qualifying family member

(QFM) of the disabled beneficiary canbe the holder, and there is no obliga-tion to seek a court order. A QFMmeans the beneficiary’s current cohab-iting spouse or common-law partner,or one or both of the beneficiary’s legalparents. A QFM who becomes a holderunder this measure may continue asthe plan holder after 2016.

This measure is temporary becausethe federal government believes thatthe provinces and territories will passlegislation to make it simpler to obtainlegal representation.

Reduction of Clawback Except in certain cases in which a ben-eficiary’s life expectancy is reduced,RDSP withdrawals require repaymentof some or all of the assistance hold-back amount (AHA), which consists ofall grants and bonds paid into theRDSP in the 10 years preceding thewithdrawal.

For withdrawals made in 2013 orearlier, the repayment amount is theAHA.

For withdrawals made in 2014 orlater, the repayment amount is thelesser of• the AHA, or• three times the amount of the with-

drawal.If a plan is terminated because a

beneficiary dies or ceases to be eli-gible for a DTC, the AHA must berepaid.

Increased Maximum AnnualWithdrawals for PrimarilyGovernment Assisted Plans(PGAPs)A PGAP is an RDSP in which govern-ment grants and bonds exceed pri-vate contributions.

In 2013 or earlier, the maximumwithdrawal from a PGAP (except incases of reduced life expectancy) isthe amount described by the formulain paragraph 146.4(4)(l) of the IncomeTax Act and referred to here as themaximum Lifetime Disability Assis-tance Payment amount, or the “max-imum LDAP amount”. This formula isdesigned to spread payments over thebeneficiary’s lifetime, which is pre-sumed to end at age 80.

In 2014 or later, the maximum with-drawal from a PGAP is the greater of• the maximum LDAP amount, and • 10 percent of the fair market value

of a plan’s assets at the beginningof the calendar year.

Increased Minimum AnnualWithdrawals for Non-PGAPsIf a plan is not a PGAP and the bene-ficiary is turning 60 years (or is older)in the year, the beneficiary must beginto make withdrawals.

In 2013 or earlier, the minimumwithdrawal can be as low as $1 peryear.

In 2014 or later, the minimum with-drawal is the maximum LDAP amount.

Rollovers from RegisteredEducation Savings Plans toRDSPsBeginning in 2014, the investmentincome earned in a registered edu-cation savings plan (RESP) can betransferred on a tax-deferred basis tothe RESP beneficiary’s RDSP, providedthat the beneficiary has RDSP contri-bution room available. Such contribu-tions do not attract the CanadaDisability Savings Grant and areincluded in the taxable portion ofRDSP withdrawals. Any grants or


Registered Disability Savings Plan Changes in the 2012 Federal Budget

bonds received by the RESP must berepaid prior to the transfer, and theRESP must be terminated by the endof the following February.

To qualify for this measure, a ben-eficiary must meet the existing ageand residence requirements in rela-tion to RDSP contributions. In addi-tion, one or more of the followingfacts must be true:• the RESP beneficiary has a severe

and prolonged mental impairmentthat can reasonably be expectedto prevent him or her from pur-suing post-secondary education;

• the RESP has been in existence forat least 10 years, and each bene-ficiary is at least 21 years of ageand is not pursuing post-second-

ary education; or• the RESP has been in existence for

more than 35 years (40 years insome cases where the beneficiaryis disabled).

Extended Termination Datewhen Beneficiary Ceases To BeEligible for DTCIn 2013 or earlier, if an RDSP benefi-ciary has been ineligible for the DTCthroughout a particular year, the RDSPmust be terminated by the end of thefollowing year.

Beginning in 2014, a holder mayelect to extend this termination dateby up to 5 years if a medical practi-tioner certifies in writing that thenature of the beneficiary’s condition

makes it likely that the beneficiary will,because of the condition, become eli-gible for the DTC in the foreseeablefuture.

When an election is made, the fol-lowing rules apply, commencing in thefirst full calendar year for which thebeneficiary is ineligible for a DTC:• no contributions to the RDSP are

permitted, unless they are speci-fied RDSP payments;

• no new grants or bonds can bepaid into the RDSP; and

• no new entitlements can be gen-erated for the purpose of carryingforward grants and bonds for yearsin which the beneficiary is ineli-gible for a DTC. n


JENNIFER A. PFUETZNERPartner, Taylor McCaffrey LLPMember, STEP Winnipeg

This article addresses commondrafting choices in wills pre-pared by lawyers that can result

in ambiguity and the need to seekadvice and directions from a court.

Issues with “Issue”The natural meaning of the word

“issue” is “descendants of all degrees,”which means children, grandchildren,great-grandchildren, and so on. Inter-pretation problems can arise whenthe term is used in a will to mean onlythe first generation of descendantsor “children.” Courts interpret “issue”to mean “children” only if clear andcogent evidence in the rest of the willdemonstrates that the testatorintended this secondary meaning ofthe word. Practitioners should use“issue” when drafting a will only when

they mean “descendants of alldegrees.”

Per StirpesMisuse of the term “per stirpes” is oneof the most frequent problems in willsprepared by lawyers. The only correctway to use the term is in conjunctionwith the term “issue,” as in the follow-ing phrase: “among my issue in equalshares per stirpes.” Any other use ofper stirpes is not technically correctand may create a serious interpreta-tion problem.

Per stirpes describes the manner inwhich property is to be divided amongbeneficiaries but does not identify,add, or define the beneficiaries. It isa division literally “by the stocks.” Adivision of property among “my issuein equal shares per stirpes” takes placeamong the living beneficiaries withinthe first generation of my descen-dants. If someone in this generationhas predeceased me, the share that

he or she would have received isdivided in the same manner amonghis or her descendants. For example,if I have two living children (each ofwhom has three children living) andone child who predeceased me (whohas two children living), each of mytwo living children are entitled to oneshare and a third share will be dividedequally between the living children ofmy deceased child. My other livinggrandchildren will not share in thedivision. Therefore, a division amongissue per stirpes excludes some sur-viving issue when at least one ances-tor intercedes between the survivingissue and the testator.

The key point is that per stirpesdoes not identify or add beneficiaries.It merely describes the manner of divi-sion among a class of beneficiaries(that class being the issue of the tes-tator or another specified person).

Canadian courts have been consis-tent in their interpretation of the

Ambiguous Will Drafting: Legal and Family Terms


phrase “issue per stirpes” when it iscorrectly used in its traditional sense.However, the Canadian law reports arereplete with cases in which courtshave been asked to provide advice anddirections when the phrase “per stir-pes” has not been used in conjunctionwith the word “issue.”

Examples of problematic uses ofper stirpes include: “children per stir-pes”; “equally between Jackie andShirley, as his or her own propertyabsolutely, in equal shares per stir-pes”; “divide among my grandchildren,per stirpes, in equal shares”; and “toJohn Adam Smith per stirpes.”

A recent problematic exampleis found in the Ontario Courtof Appeal’s decision in Dice v.Dice Estate, 2012, ONCA 468,which dealt with the interpreta-tion of a will that directed theresidue of an estate to be held in alife trust for the testator’s widow. Onthe widow’s death, the will directedthe residue to be divided “equallybetween my son, James Edgar Dice,and my daughter, Marlene MargueriteBuck, per stirpes.” James survived thetestator but died before the widow. Aquestion arose as to who was entitledto his share of the residue. The OntarioCourt of Appeal ultimately attributedmeaning to the phrase “per stirpes,”deciding that James’s share went tohis children on the basis of the lan-guage in the will as a whole and thesurrounding circumstances.

Other judges in previous casesinterpreting wills with similar languagehave refused to give the term “per stir-pes” any meaning when it is used out-side its traditional technical context.Because cases turn on their particularfacts, it is vital that lawyers use tech-nical terms correctly to ensure cer-tainty in the administration of estatesand the interpretation of wills.

Per CapitaIt is important to understand the dif-ference between a division “per stir-

pes” and a division “percapita.” A division percapita provides oneequal share to everyliving member of aclass of beneficiar-ies. A division“among myissue in equalshares percapita” pro-vides anequal

share to each living child, grandchild,and great-grandchild of a testator,regardless of how many living ances-tors intercede between a particularindividual and the testator.

It is extremely important how thephrases “per capita” and “per stirpes”are combined with the beneficiaryclasses of “children” and “issue.”

Words That Describe FamilyMembersSpecial care should be taken whendefining a beneficiary or class of ben-eficiaries by reference only to theirfamily relationship to another person.This is particularly true in an era whenblended families are commonplace.For example, the term “children” doesnot usually include stepchildren or aminor to whom a person stands inloco parentis. However, depending onthe wording of a particular will andthe surrounding circumstances, themeaning of “children” might be

extended toinclude these

people. Depending on the

context, the term “spouse”can include a married same-

or opposite-sex spouse andan unmarried same- or oppo-

site-sex common-law partner.Additional uncertainty may arise

because the definition of “common-law partner” varies from jurisdiction

to jurisdiction, making it difficult toknow which test the testator intendedto be applied. Some people (for exam-ple, those who are separated from amarried spouse and cohabiting witha common-law partner) may havemore than one spouse, leading toadditional uncertainty about whichpeople a testator intended to benefitunder his or her will. n

KATHLEEN CUNNINGHAMChair, STEP Canada Trust and EstateTechnical Committee

Members are well aware of thework that STEP Canada hasundertaken over the years

through its Tax Technical Committee.Relatively absent over the past 15years, however, has been a committeededicated to the non-tax field. Inearly 2012, Tom Grozingeragreed to chair the newly formed“non-tax technical committee.”The group quickly changed itsname to the Trust and EstateTechnical Committee and met sixtimes in 2012. Members of thecommittee are: Kathleen Cun-ningham, chair effective January2013 (British Columbia); PhilRenaud (Alberta); Beaty Beaubier(Saskatchewan); Jennifer Pfuet-zner (Manitoba); Tom Grozinger(Ontario); Lucie Beauchemin(Quebec); and Tim Matthews(Nova Scotia and the Atlanticregion).

Because the potential scope of thecommittee’s work is so broad, thecommittee’s first order of businesswas to define its terms of referencewhich were approved by the board inthe spring of 2012. The committee’smandate is to: 1. As requested and appropriate:

a. Review important case law andfederal and provincial non-taxlegislation affecting trust andestate practice.

b.Draft or review proposals/ sub-missions concerning legislativechanges to the relevantgovernment authorities and/orpolicymakers.

2. Develop and maintain the criteriaand process for making STEPCanada submissions.

3. Maintain a contact list of, and asrequired establish good workingrelationships with, variousgovernment or other officialswho are influential in STEPCanada achieving its noted objectives.

4. Create a list of ongoing lawreform initiatives/proposals.

5. Recommend to the Board variousresearch topics that STEP Canadamay want to consider pursuingwith various staff members (orother delegated parties).

A number of developments came tothe committee’s attention in 2012. Fora variety of reasons, the committee wasunable to pursue them or felt it wasinappropriate to do so. However, inAugust 2012 the Uniform Law Confer-ence of Canada approved the UniformTrustee Act (UTA). The committee rec-ognizes this development as an impor-

tant opportunity for STEP Canada andits provincial branches to take a proac-tive role in encouraging provincialpolicy makers to consider moderniz-ing provincial trust law. In the process,the committee hopes to acquaint theseprovincial officials and law reformbodies with STEP Canada to ensure thatthey consult with this organizationabout future law reform initiatives that

affects its members. In her New Year’s address to

STEP members worldwide,Hélène Anne Lewis wrote aboutthe importance of STEP as anadvocate for trust and estatepractitioners as they are affectedby local, regional, and interna-tional regulatory developments.She reinforced the importance ofSTEP members’ participation atthe branch level and their sup-port of regional committees inmaintaining STEP’s success andeffectiveness.

It is in this spirit that the Cana-dian Trust and Estate TechnicalCommittee is encouraging

provincial branches in the common-law jurisdictions to study the UTA andto contact a member of this commit-tee to discuss ideas for moving for-ward with law reform in theirrespective provinces. The committeewill provide guidance to ensure thatwhile unique provincial needs andpolicy decisions are respected, wherenecessary, consistent positions will bemaintained across jurisdictions toensure the organization’s credibility.For more information on the UTA seethe brief article in this edition “TrustLaw Reform in Common Law Canada– Has its time come?” n


Update from the Trust and Estate Technical Committee

KATHLEEN CUNNINGHAMPublic Guardian and Trustee of BritishColumbia; Member, STEP Vancouver

Many members will recall STEPCanada’s first symposium inNovember 2007, “Trust Law

Reform in Canada”. Prior to the event,85 specialists from across Canada,including senior practitioners fromSTEP Canada branches, representa-tives from law reform institutes, aca-demics and government officials, metin teams by teleconference. They thengathered for an opening evening ses-sion, followed by a day of workshopsand discussion.

Participants were unanimous thattrust law reform was long overdue.They further agreed that the sevenyears of work of the BC Law Institutecaptured in the report “A ModernTrustee Act for British Columbia”issued October 2004, provided astrong starting point. It is worth notingthat the work of the BC Law Institutepaid careful attention to the work ofthe Ontario Law Reform Commission’s1984 Report on the Law of Trusts.

Much of the trust law reform inCanada’s common law jurisdictions inrecent decades has been limited totrustee investment provisions and apatchwork of amendments introducedin a few jurisdictions. Quebec intro-duced a significant reform of its civillaw in this area in 1994. It was againstthis backdrop that the Uniform LawConference of Canada (the ULCC)agreed at its August 2009 meeting totake on the challenge of preparing aUniform Trustee Act for common lawjurisdictions in Canada. In just threeshort years, the ULCC has approved aUniform Trustee Act (UTA) for common

law jurisdictions in Canada. The UTAconsolidates research and thinking ontrust law reform going back to 1984and draws heavily on the work com-pleted in BC.

The UTA seeks to provide a modernTrustee Act, which if adopted incommon law provinces, would bothmodernize our laws and bring somemuch needed consistency across juris-dictions. While we recognize that com-plete uniformity is not likely to occur,many of the proposed changes to thelaw are not contentious. Readers areencouraged to review the WorkingGroup’s final report and the UniformTrustee Act, with its commentary andnotes.

• Uniform Law Conference ofCanada, 2012 Whitehorse YKAnnual Meeting(www.ulcc.ca/en/2012-whitehorse-yk/599-civil-section-documents-2012)

• Uniform Law Conference ofCanada, 2012 Whitehorse YKAnnual Meeting, Uniform TrusteeAct – Final Report of the WorkingGroup (www.ulcc.ca/en/2012-whitehorse-yk/599-civil-section-documents-2012/1254-uniform-t

rustee-act-final-report-of-the-working-group)

• Uniform Law Conference ofCanada, Uniform Trustee Act(www.ulcc.ca/images/stories/2012_pdfs_eng/2012ulcc0029.pdf)

The working group’s report sets outthe more significant reforms on pages5-8. Space does not permit a detailedreview. However, some of the moreinteresting reforms would, with appro-priate restrictions: modify the stan-dard of care that applies to trusteeswith a professional skill, allow trusteesto apportion expenditures betweencapital and income, permit total returninvesting, replace the default unanim-

ity rule with majority rule, permit del-egation and sub-delegation, permitvariation of trusts when all benefici-aries agree, allow the court to consenton behalf of a dissenting beneficiary,provide for pre-taking of fair and rea-sonable compensation, place limits onthe enforceability of trustee exemp-tion clauses, and abolish the ruleagainst perpetuities and laws relatedto accumulation of income. n


Trust Law Reform in Common Law Canada – Has its time come?

The UTA seeks to provide a modern Trustee Act,which if adopted in common law provinces,

would both modernize our laws and bring somemuch needed consistency across jurisdictions.

While we recognize that complete uniformity isnot likely to occur, many of the proposed

changes to the law are not contentious.

TESTATOR INTENT IS NOTALWAYS ASCERTAINABLE:A CAUTIONARY TALE FORWILL DRAFTERS

SARAH DYKEMASenior trust adviser, RBC WealthManagement, Estate and TrustServices; Student member, STEPAtlantic

Recently, in Das Estate (Re), 2012 NSSC441, the Supreme Court of Nova Scotiaconsidered a will that failed to make aprovision to distribute the bulk of thetestator’s estate (an investment accountworth close to $1 million) in the eventthat the testator’s wife survived him by10 days, which she did. The key issuefor the court was whether it was pos-sible to determine the true meaning,intent, and effect of the language of thewill, and in particular the testator’s intentregarding asset distribution.

The relevant provision of the will leftthe residue of the deceased’s estate (withthe exception of the investment account)to his wife in trust. The will then pro-vided that in the event that his wife failedto survive him for 10 days, his daugh-ter was to receive 50 percent of theresidue of the estate (not including theinvestment account); the investment

account was to be distributed amongcharities. The will also purported toestablish a charitable purpose trust,using a certain percentage of the invest-ment account funds and the remainderof the residue of the estate. Thedeceased was estranged from his wife,but the will was executed after the sep-aration. The wife received other signif-icant assets outside the will.

The court noted that when interpret-ing wills, judges should place them-selves in the position of the testator todiscern the testator’s intention at thetime that the will was executed; this isthe so-called armchair rule of interpre-tation. Once a court has ascertained thetestator’s intention, it can then give effectto it. In the event of an alleged omissionin the wording of a will, a court shouldadd words to remedy the omission onlywhere it is clear there has been an inac-curate expression of intent by the tes-tator, and it is clear what words thetestator intended to actually use.

The court suggested several possi-ble intentions of the testator relating tothe investment account, including anintention that it pass to the wife anddaughter on intestacy (meaning the‘omission’ was deliberate), an intentionthat the wife receive it outright (ratherthan in trust), and an intention that the

account funds be frozen in time for hischarities.

The court considered other docu-ments left by the testator that werefound with him at death, including anote expressing the intention that hiswife act as “executrix of charitable dona-tions.” The wording of the will wasinconsistent with this document, as thewill provided that the charitable dona-tions were to be distributable only onthe wife’s death. Unfortunately, thelawyer who drafted the will did not haveany notes or specific recollections of thetestator’s intentions to assist the court.

Given the wording of the will and theavailable extrinsic evidence, the courtfound that it would be “wholly withinthe realm of speculation” to ascertainthe testator’s intention regarding theinvestment account in the event that hiswife survived him, and that making anysuch assumption would be “making aquantum leap” in the circumstances.Therefore, the court was unable andunwilling to add words that the testa-tor may have omitted and held that theinvestment account would pass on apartial intestacy.

Similarly, the court found that the willfailed to use the language necessary toproperly dispose of the residue of theestate in accordance with the residue


I N T H E H E A D L I N E S

clause (where 50 percent was to go thedaughter outright, and the investmentaccount and 50 percent of the residuewere to go to charities in trust) becausethe triggering event (the wife not sur-viving the deceased by 10 days) did notoccur. The residuary gift therefore failed,meaning that the undistributed estatealso passed on intestacy.

Certainly the testator did not intendthat a court be involved in an interpre-tation of his will. This case underscoresthe need for will drafters to take specialcare to ensure that the true intent of thetestator is reflected in the language ofthe will and in notes or other documentsrelating to the will.

PROHIBITION AGAINSTPOWER OF APPOINTMENTFOR TRUSTEE’S OWNBENEFIT: A RULE OF PUBLICORDER IN QUEBEC

JENNIFER LEACH Associate, Sweibel Novek LLP

The rules of public order in Quebec’scivil law are fundamental yet nebu-lous. “Public order” refers to a collec-tion of fundamental rules that affectthe organization of the nation, theeconomy, morality, health, security,public peace, and essential individualrights and liberties. Rules of publicorder cannot be overturned or circum-scribed.

The Civil Code of Québec (theCode) provides that a settlor of atrust may reserve for himself or her-self the power to appoint the bene-ficiaries or determine their shares, orto confer this power on the trusteesor a third person. Article 1283 of theCode provides that those who holdthe power to appoint beneficiaries orto determine their shares exercisethis power as they see fit. They maychange or revoke their decision inaccordance with the requirements ofthe trust. However, they may not

appoint beneficiaries for their ownbenefit. A recent judgment of theQuebec Superior Court held for thefirst time that this prohibition is arule of public order in Quebec.

Sylvain Girard v. Reevin Pearl, 2012QCCS 5259, was a case that involveda motion to dismiss a claim by Girardagainst his former lawyer, Pearl, forthe return of approximately $182,000in legal fees. Girard had filed for bank-ruptcy in 2009, before a trial on themerits of the case, following which thetrial could not proceed. The suit wascontinued first by the trustee in bank-ruptcy and then by Girard’s formercommon-law spouse, Carmen Magny.However, at the time the motion washeard, the action in demand was notback on the roll for hearing.

Pearl sought to have the actionagainst him (which had been contin-ued by Magny) dismissed on theground (among others) that Magnyhad no interest in the suit. In Quebec,article 257 of the Code of Civil Pro-cedure provides that a suit may becontinued by the person who acquiresthe right that is the subject of the suit.Magny claimed that she had beenassigned the rights in Girard’s actionagainst Pearl by way of a transactionin 2010. The court determined thatMagny did not have the legal interestnecessary to continue Girard’s actionagainst Pearl because she was neitherthe beneficiary nor the assignee of thetrust (the fiducie R) that had purchasedthe rights to the action against Pearlfrom Girard’s trustee in bankruptcy.

Before his legal troubles began,Girard, a successful chiropractor, hadestablished two trusts to protect hisassets. In 2008, Magny had beenappointed as the sole beneficiary ofthe first trust (the fiducie SG) by itssole trustee, Girard. Fiducie SG wasthe beneficiary of fiducie R. FiducieSG had no assets and fiducie R hadsubstantial assets, which had beenfunded by Girard personally. FiducieR had two trustees: Magny and a

lawyer who established the trusts forGirard. Before 2008, fiducie R hadloaned money to Girard to pay Pearl’slegal bills for an action in defamation. In 2010, Magny, fiducie R, and thetrustee in bankruptcy entered into atransaction whereby Magny becamethe sole beneficiary of fiducie R andwas transferred an interest in theaction against Pearl.

However, the deed that constitutedfiducie R had a restricted list of pos-sible beneficiaries, and, at the time ofthe transaction, neither fiducie SG norMagny fell within any of the permit-ted categories. Because Magny lackedthe qualifications necessary to be abeneficiary of fiducie R, she could notbe appointed as a beneficiary pursuantto the transaction in 2010. Further-more, at the time of the transactionin 2010, the only trustee of fiducieR was Magny; the lawyer had previ-ously resigned. Therefore, pursuantto article 1283 of the Code, Magny, asa trustee, could not legally appointherself as the sole beneficiary offiducie R because such an action wasfor her own benefit.

Sylvain Girard v. Reevin Pearl is thefirst case in Quebec to enunciate theprinciple that the prohibition againsta trustee’s ability to appoint a bene-ficiary for his or her own benefit is arule of public order.

UNSUCCESSFULRECTIFICATIONAPPLICATION

JOAN JUNGPartner, Minden Gross LLP; Member,STEP Toronto

The Ontario Superior Court denied arectification application in the recentcase of Kanji v. Attorney General ofCanada, 2013 ONSC 781. This appli-cation was made shortly before the21st anniversary of the date of settle-ment of a trust. For Canadian income


tax purposes, subject to limited excep-tions, there is a deemed disposition atfair market value of all capital propertyowned by an inter vivos trust on the21st anniversary of its date of settle-ment and each 21st anniversary there-after. Typical planning before the 21stanniversary involves the distributionof trust property to the beneficiaries,usually on a rollout basis (a distribu-tion at cost). Because the beneficiariesare often members of the next gener-ation, the distribution of the growthassets to them achieves a deferral.

Mr. Kanji settled the Kanji familytrust in 1992 by means of a transferof $5,000 cash. The initial trusteeswere Mr. and Mrs. Kanji. The benefi-ciaries were Mr. and Mrs. Kanji andtheir issue. All beneficiaries were eli-gible to receive both income and cap-ital. Mr. Kanji had the power to removeor substitute trustees and to appointadditional trustees. The trust becamethe shareholder of a private corpo-ration, Sutter Hill. The evidence indi-cated that there were incomedistributions to Mr. and Mrs. Kanji incertain years.

Mr. Kanji obtained advice thatbecause he was the settlor, one of twotrustees, and a capital beneficiary, sub-section 75(2) of the Income Tax Actcould apply to cause attribution con-sequences with respect to the initial$5,000 contribution to the trust orproperty substituted for it. In otherwords, the income or loss or the cap-ital gain or capital loss from this prop-erty or substituted property could beattributed to Mr. Kanji. Subsection75(2) requires a transfer of propertyand the satisfaction of a statutory con-trol condition or reversion condition.Because Mr. Kanji was the settlor, hetransferred funds to the trust. Thereversion condition was met becausehe was a capital beneficiary, and there-fore the trust property could be dis-tributed to him. The control conditionwas arguably met because he was oneof two trustees and effectively had a

negative veto. Thus, trust propertycould not be disposed of without hisconsent. Because the Canada RevenueAgency has commented favourablyon the trustee/negative veto situationin recent years, arguably the statutorycontrol condition was not met.

It was not the attribution conse-quence of subsection 75(2) that wasproblematic. Mr. Kanji was also advisedthat when subsection 75(2) applied toany trust property, subsection 104(7.1)denied the rollout of capital propertydistributed to anyone other than him-self. If capital property were distrib-uted to Mr. Kanji, it would roll out atthe trust’s cost. However, if propertywere transferred to his issue, thetransfer would trigger a deemed dis-position at fair market value withresultant tax consequences for thetrust. The trust’s assets had increasedconsiderably in value, so the inabilityto distribute on a rollout basis to thenext-generation beneficiaries beforethe 21st anniversary would have trig-gered significant income tax.

Although not explicit in the judg-ment, the rectification that Mr. Kanjisought was presumably the strikingof the clause in the trust agreementthat designated Mr. Kanji as a capitalbeneficiary, because this would haveavoided the statutory reversion con-dition in subsection 75(2). If subsec-tion 75(2) had not applied to any trustproperty, the rule denying the rolloutto next-generation beneficiaries wouldnot have applied.

The court noted that in a rectifica-tion application the applicant bears theonus of proof. In this case, Mr. Kanjiwas required to demonstrate on a bal-ance of probabilities that at the timehe settled the trust, he intended to doso in a tax-efficient manner to allow atax-deferred transfer of the trust’sassets to his children in the future. Thecourt held that the burden of proof wasnot met. The only evidence tenderedwas the affidavit of Mr. Kanji, whodeposed that he did not intend to

receive any capital distributions fromthe trust, notwithstanding that he wasdesignated as a capital beneficiary, andthat he believed that his lawyers hadmade a drafting mistake since they didnot consider the effect of subsection104(7.1). The court drew a negativeinference from the lack of contempo-raneous documents regarding hisintention, including the lack of evi-dence from the lawyers involved in set-ting up the structure. The rectificationapplication failed.

The judgment implies that a spe-cific intention to avoid the unintendedtax consequence was needed to sup-port the rectification application.Because 21st anniversary planning isso important for an inter vivos trust,the intention to roll out (or the risksof not being able to do so) should bedocumented at the time of settlement.

CASE COMMENT

NANCY L. GOLDINGPartner, Borden Ladner Gervais LLP;Member, STEP Calgary

Fuchs v. Fuchs: Rectification and Intention Under the Willsand Succession ActThe new Alberta Wills and SuccessionAct (WSA) came into effect, for themost part, on February 1, 2012. Itchanged the old law, which providedthat marriage revoked any will thatdid not contain a declaration that itwas made in contemplation of themarriage. The WSA also introduceda court’s ability to rectify a will and toadmit evidence of a testator’s intent.

In February 2013, the Alberta Courtof Queen’s Bench considered rectifica-tion and evidence of a testator’s intentunder the WSA in Fuchs v. Fuchs, 2013ABQB 78. Hans Fuchs, the deceased,executed a will on June 22, 1999; wasgranted a divorce from his first wifeon January 20, 2000; married BarbaraLippka first on February 21, 2000 (one


day short of the divorce appeal dead-line) and then again on April 20, 2001;and died on February 8, 2012. In hiswill, Hans appointed “my friend Bar-bara Lippka” as his executrix and gavethe residue of his estate to “my friendBarbara Lippka.”

The court reviewed section 8 of theWSA, which states that the previouslegislation continues to apply as ifunrepealed in respect of wills madeduring the time that the previous leg-islation was in force, subject to cer-tain exceptions that are inapplicablehere. If that were the end of the matter,the previous legislation would prevailbecause the marriage of Hans and Bar-bara took place after the will wasmade, and the will contained no dec-laration that it was made in contem-plation of the marriage; the will wouldbe revoked, and Barbara would beentitled to $150,000 and one-half ofthe estate on intestacy. She wouldshare the estate with Han’s childrenfrom his first marriage.

The court then considered the restof section 8, which states that certainparts of the WSA apply if the testa-tor died after the Act came into force.Section 26 is one such part. It providesthat a will must be interpreted in amanner that gives effect to the intentof the testator and defines the evi-dence that can be admitted to assistin such an interpretation.

Another part is section 39, whichallows a court to rectify a will by“adding … words or provisions spec-ified by the Court if the Court is sat-isfied, on clear and convincingevidence, that the will does not reflectthe testator’s intentions because of …a misunderstanding of, or a failure togive effect to, the testator’s instruc-tions by a person who prepared thewill.”

There was no evidence from thelawyer who prepared the will. Thecourt examined extrinsic evidence ofHans’s intention and considered whyBarbara was referred to as “my friend”

if the will was made in contemplationof marriage to her. The court consid-ered that because Hans was notdivorced from his first wife at the timehe made the will, he could not call Bar-bara his “spouse” and would beunlikely to have called her his“common-law spouse.” The courtdetermined that the word “friend” wasaccurate and logical in the circum-stances.

The court further found that Han’sintention was to leave his estate toBarbara, either before or after mar-riage, and concluded that the lawyereither misunderstood the instructionsor failed to give effect to them. To findotherwise, the court stated, would“make the law an ass.” “It would bea travesty of justice if [Barbara] couldhave inherited, without the contem-plation of marriage or without eventhe actual marriage, but not inheritfollowing a contemplation of marriageand the actual marriage.”

The court added the followingwords to the will: “This will is in con-templation of my marriage to myfriend BARBARA LIPPKA at such timeas I am legally able to do so.”

Fuchs is one of the first cases underthe WSA in which a court looks atextrinsic evidence to determine theintention of the deceased and addsa clause to a will to carry out thisintention. The timing of Han’s death,one week after the WSA came intoforce, completely changed the out-come of the case. n


MARY ANNE BUESCHKENSChair, STEP Canada

Our 15th anniversary

year is upon us. It is

a great honour for me

to be serving as chair of STEP

Canada during this milestone

event. Over the last 15 years,

the combined efforts and vision of so many dedicated vol-

unteers have fuelled and guided STEP Canada in becoming

a vital and influential organization and an educator within

our professional community.

Throughout this anniversary year we will take time to

celebrate and focus on where we started, where we are,

and where we go from here.

As I wind down my two-year term as chair, I want to

acknowledge Michael Cadesky, Paul LeBreux, Grace Chow,

and Kim Moody for their great leadership and vision during

their tenures as chair, and for their continued involve-

ment and dedication to STEP as past chairs. Their guid-

ance has been invaluable to me and our organization,

and I sincerely thank each of them.

I would also like to thank Michael Dodick, chief oper-

ating officer; Janis Armstrong, director of business devel-

opment; and the entire STEP Canada staff. Working with

them over the last two years has been terrific, and I thank

them for their tremendous work, day in and day out, man-

aging the operations of STEP Canada. Well done.

In addition, my thanks go to David Harvey, chief oper-

ating officer of STEP Worldwide (SWW); Michael Young,

former chair; and Hélène Lewis, current chair. It has been

a privilege to work with SWW, its executive, and its staff

during my tenure. I have appreciated working coopera-

tively as STEP Canada continues to grow and develop under

the SWW umbrella, and I look forward to continuing to work

with our colleagues at SWW in my new role as past chair.

The 15th National Conference is just a few weeks away.

New and enhanced components this year include: reduced

student pricing, additional concurrent sessions, enhanced

exhibit booths, enhanced sponsorship benefits and invest-

ment levels, and a very special gala social event at the

Royal Ontario Museum. I offer my thanks to the Program

Committee for its monumental efforts in designing such

a creative, widely appealing, technically relevant, and

balanced program. Once again, accreditation for the 15th

National Conference will be sought in applicable jurisdic-

tions as soon as the content is finalized.

I would like to congratulate Judge Craig Jones on his

invitation to accept judicial membership status from STEP

Worldwide. Judge Jones, appointed to the Court of Queen’s

Bench of Alberta in 2011, is a longtime supporter of STEP

Canada and the founding chair of STEP Calgary.

I’m thrilled to report that the first chapter development

meeting for London, Ontario, will be held in June of this

year. London area members have been very responsive

to the initiative that will offer local networking oppor-

tunities, local programs, programming tailored to regional

interests and practice areas, and student study groups.

Chapter members will continue to be affiliated with the

Toronto branch as this new chapter develops.

Our technical committees continue to keep us informed.

The Trust and Estate Committee has arranged for Dono-

van Waters to speak about the Uniform Trustee Act,

released December 2012, during the national conference.

A lobbying effort to see the Act introduced in additional

jurisdictions is in its early stages of development. The

Tax Technical Committee recently released two eNews

messages to members regarding the Quebec budget and

the national budget and how changes will affect trust and

estate practitioners. The committee will determine if any

of the national budget items or recent cases warrants a

submission to the Department of Finance or a more

detailed article for members. Thanks to the chairs of these

two committees, Kathleen Cunningham and Pamela Cross.

As June approaches, there will be a number of new

regional branch chairs and officers elected, in addition to

a changing of the guard at the national level. As my two-

year term as chair comes to an end, I am very happy to

see the growth that our organization has experienced (we

welcomed 186 new members last fiscal year), the excep-

tional educational offerings we provide for practition-

ers, and the increasing value we deliver to our members.

I have been very fortunate in the support that I have

received from extraordinary individuals – specifically, Ian

Worland, Tim Grieve, and Ruth March, who all served

on the Executive Committee. Thank you so much!

And to you, the members and dedicated volunteers of

STEP Canada, I offer my most sincere thanks for your

belief in and support of this fantastic association. n

sameness and change respecting unmarried cohabitants · the step diploma – page 3 step study –...

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