League and Williams Lawyers

Tag: beneficiary

  • What is a Testamentary Contract?

    What is a Testamentary Contract?

    A testamentary contract allows a will writer to leave their estate to another person in exchange for something. Usually, this comes in the form of services, like end of life care for the will writer. A testamentary contract is a binding contract. A will writer will not be able to change the beneficiary of the assets after agreeing to the contract. Testamentary contracts can often give rise to estate litigation, for a number of reasons. In this article, we’ll cover the basics of testamentary contracts and problems that can arise from them in your estate plan.

    Basics of the Testamentary Contract

    When a will writer enters into a testamentary contract, they are agreeing to give their estate, or a specific asset to a specific person. If they later change their will to deprive this person of the assets promised in the testamentary contract, the beneficiary can sue for breach of contract. If they are successful in proving the existence and breach of a testamentary contract, either before or after the death of the testator, the Courts can enforce the contract by varying the will.

    Common Problems

    It is not uncommon for testamentary contracts to take the form of a verbal agreement. The most common problem litigants face in enforcing a testamentary contract is proving the existence of the contract to the Courts. This exact problem came before the B.C Supreme Court in the 2022 case of Angelis v. Siermy. 

    Without a clear record of a testamentary contract, it is up to the claimant to prove beyond a reasonable doubt that there was an agreement.

    In this case, a woman with no children left the majority of her high-value estate to one of her nieces in a 2002 estate plan. Years later in 2011, the aunt changed her will to give most of her estate to a different one of her nieces. The first niece, the claimant, alleged she had an oral testamentary contract with her aunt. In the alleged agreement, the aunt promised the majority of her estate to this niece in exchange for several years of unpaid end of life care. She claimed that the execution of the 2011 will breached this agreement. 

    Somewhat unusual in estate litigation, the will writing aunt was still alive when her niece brought this claim. The aunt denied the niece’s claim that they had a testamentary contract or even a verbal agreement, though neither parties had witnesses to support their claims. The claimant provided the Court with letters allegedly written by her aunt which explained her reasons for executing her 2002 will. The aunt denied writing these letters and, ultimately, the Court found that the claimant had forged two of the letters she submitted as evidence. The Court stated there wasn’t sufficient evidence that a testamentary contract ever existed between the two parties, and the claim was dismissed. 

    Key Takeaways

    Testamentary contracts are not uncommon in estate planning, as will writers promise loved ones certain assets in exchange for end of life care or other services such as home maintenance. However, people entering into these agreements should clearly document that there is an exchange of estate assets for services or other consideration. It is also advisable to ensure that other parties are aware of the will writer’s intention to exchange specific assets for services from a beneficiary. Having a record of the agreement which can be supported by witness testimony will ensure that the Courts can enforce a testamentary contract, even after the death of the will writer. 

    If you have questions about giving estate assets to a beneficiary in exchange for services, or if you are concerned that your testamentary contract won’t be honoured by a will writer, contact an experienced estate lawyer today.

    Have a question about this topic or a different legal topic? Contact us for a free consultation. Reach us via phone at 250-888-0002, or via email at info@leaguelaw.com. 

  • Estate Planning: Trustees and Beneficiaries

    Estate Planning: Trustees and Beneficiaries

    We’ve recently come across the following question on a Canadian personal finance group: “Is there someone that could chat with me about naming a minor beneficiary (under age) with a trustee, vs naming the person I would use as a trustee as a beneficiary?” In this article, we’ll break down the question and legal answers in simple terms.

    What is a Beneficiary?

    In the estate planning context, a beneficiary is an individual or entity, like a charity, designated to receive assets in a will. They receive the specified assets according to the terms of the will. Anyone can be a beneficiary, but will writers should be advised that some provinces require that dependents such as children (and adult children) are provided for adequately in the will. 

    What is a Trustee?

    A trustee is a person appointed to manage and give out assets on behalf of a beneficiary and on the terms of the will. The trustee has a duty to act in their best interests. Trustees can be individuals, such as family members or friends, or professional entities like banks, accountants or lawyers. Their responsibilities may include investing and managing assets, distributing income or assets to beneficiaries, and ensuring compliance with relevant laws and regulations.

    Will writers can specify terms for how and when their beneficiaries receive their inheritance funds. This is especially common for inheritances going to young people.

    Naming a Would-Be Trustee as a Beneficiary

    There are a number of key differences between beneficiaries and trustees which are relevant to this question. The most important difference is their relationship with and responsibility to the estate. Because trustees have a duty to beneficiaries to protect the assets and give out their inheritance on the terms of the will, naming a would-be trustee as a beneficiary will not save you any time or money. The would-be trustee would likely be found to hold the asset on constructive trust if you have made your intentions for the asset clear, meaning it makes little difference to name them as a beneficiary rather than trustee. In fact, it could give rise to litigation over the assets in the long-run or risk mismanagement of the assets. 

    Naming a would-be trustee as a beneficiary of assets with the intention of those assets to ultimately go to another person is not an effective way to bestow a gift in your will.

    Handling Estate Inheritance to a Minor Beneficiary

    Estate planning for those with minor children, dependents or loved ones can feel complicated or stressful. While you may want to ensure their financial well-being after your passing, many people worry about entrusting a lump sum of funds or a high-value asset to a young person who might not be ready to maximize the benefits of such a gift. Fortunately, estate planning lawyers can use a variety of tools when crafting a will to ensure that you pass down assets to minors exactly as you intend. The most common tool is the trust, which holds assets for beneficiaries on specific terms decided by the will writer. The trustee actively manages the assets and cares for the beneficiary until transferring the trust assets to them.

    A typical provision in BC wills contains instructions for handling estate shares designated for a minor child. For example, it may state that inheritance minors will be held on trust, paying out fully when they are older. Other common clauses might include instructions to pay out when the child graduates university or buying a home. Using the trust, the will writer has control over how and when the minor beneficiary will receive their inheritance.

    Appointing a Trustee for a Minor Beneficiary

    When creating a trust for a minor, it’s a good idea to choose a trustee who knows them well. Some will writers choose to hire a professional trustee to oversee the assets and release the trust funds. Naming your potential trustee as a beneficiary can complicate expressing asset management wishes in the will. This might necessitate separate documents for clear terms between the trustee and ultimate beneficiary. 

    Naming a minor beneficiary in a will and appointing a trustee is a common part of the estate planning process. If you’re looking for guidance on estate assets going to a minor beneficiary, contact an experienced estate planning lawyer today.