“Pour-Over” No More?

“Pour-Over” No More?

Alexandra Manthorpe
Posted November 16, 2022 Category: Individuals/Families, News & Updates

For many years, a common estate planning technique, especially when gifting to beneficiaries living in the United States (U.S.), was to include a so-called “pour-over” clause, whereby the gift under the Will intended for the U.S. beneficiary would actually be paid into and become part of a U.S. trust, created for the benefit of that U.S. beneficiary and maybe also his or her own family members.

We were first alerted that this kind of planning might be challenged with the 2019 British Columbia Court of Appeal decision of 
Quinn Estate v. Rydland (2019 BCCA 91), which centred on the estate of the well-known hockey player and coach Pat Quinn.  Mr. Quinn’s Will included a clause purporting to transfer the residue of his estate (the balance left after debts and taxes, etc.) into an inter vivos family trust (a trust created while the Settlor, being the creator the trust, was alive).  The B.C. Court of Appeal held that if a Testator’s Will includes a disposition to an amendable trust which can be revoked, that the gift will be invalid.  Mr. Quinn’s family trust had, in fact, been amended after his Will was signed.  The Court felt that deciding otherwise would give the Testator the ability to make a testamentary disposition (a gift under a Will) through another vehicle (i.e. an inter vivos trust here) which doesn’t comply with the required Wills legislation.  Further, if the trust is amendable and/or revoked, it may be impossible to actually identify the Testator’s testamentary wishes.

Supreme Court of Canada decisions are binding on all of Canada, but Court of Appeal decisions are only binding in the province or territory where they are decided, so 
Quinn Estate – while interesting – wasn’t law in Ontario…until a few months ago.  This year, the Vilenski v. Weinrib-Wolfman decision (2022 ONSC 2116) was released.  Put simply, Quinn Estate is now the law here in Ontario too. 

Due to 
Vilenski, the “mere possibility” that the trust at issue could be amended or revoked will render the “pour-over” clause in the Will invalid.  Interestingly, some other Canadian jurisdictions, like Nova Scotia, may still accept “pour-over” clauses in Wills, but these should generally now be regarded with great caution in Ontario, particularly if there’s an intended transfer to an amendable and/or revocable trust, like we see with many trusts for U.S. beneficiaries.

If your Will includes a “pour-over” clause, it may need to be reviewed in light of 
Vilenski.  While inclusion of a “pour-over” clause is not forbidden, it would be advisable for any Will containing such a clause to include “back up” language, to avoid an intestacy, partial intestacy or other unintended consequence from arising if the clause is held to be invalid.  Please contact our lawyers today if you would like to learn more.

Alexandra Manthorpe
Posted November 16, 2022 Category: Individuals/Families, News & Updates

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