All About Estates

Anti-Lapse Provisions May Also Be Anti-Intent

Today’s blog was written by Demetre Vasilounis, Associate at Fasken LLP.

One of the most important things that estate lawyers aim for when drafting a will for their client is to avoid an outcome that is contrary to their client’s testamentary intent. There are many instances where a will is not clear about what will happen when a specific event or sequence of events occurs, and in such instances a statute or common law principle will often dictate the result.

One significant example of this situation occurs through Section 31 of Ontario’s Succession Law Reform Act (SLRA). Known as the “anti-lapse”[1] provision, Section 31 applies in the event that a beneficiary from within a specific class of beneficiaries predeceases a testator. Essentially, Section 31 states that when a beneficiary who is a testator’s child, grandchild, or sibling, predeceases the testator, and leaves a spouse and/or issue, the gift will be treated, except when a contrary intention appears in the will, as if:

  1. they had died immediately after the testator;
  2. they had died intestate;
  3. they had died without debts; and
  4. Section 45 of the SLRA, which states that spouses get a preferential share of an intestacy, had not been passed.

Essentially, what this means is that the beneficiary’s gift becomes equally distributed amongst whomever of their spouse and/or children are alive at the time of their death, and that this gift is unaffected by any outstanding debts they have incurred. It can very well be the case that a testator may forget to update their will to account for the death of one of their beneficiaries, so Section 31 seems to exist to support the families of deceased beneficiaries who may very well be suffering financially if the deceased beneficiary was a family breadwinner. It is also worth noting that other provinces have similar provisions in their succession law statutes.

The problem with Section 31 is that it may be the case that a testator does not want a beneficiary’s spouse and/or issue to receive that beneficiary’s gift should he or she predecease the testator. This may be true whether the testator has a good or bad relationship with said spouse and/or issue. Sometimes, a testator would simply rather have a beneficiary’s lapsed gift fall into the residue of their estate, thus resulting in larger gifts for other beneficiaries. The worst case scenario is when the testator had an acrimonious relationship with a beneficiary’s spouse and/or issue, and the executors and trustees determine that in order to give effect to the testator’s intent, they eventually may have to face the spouse and/or issue in court and demonstrate to that court that a “contrary intention” to exclude the application of Section 31 to the lapsed gift appears in the will. The issue then becomes whether or not the language of the will indicates such a “contrary intention”, and determining this can prove to be costly and laborious exercise for all parties involved if the will is not clear on the matter.

Thankfully, one can draft a will to plainly and undeniably demonstrate this “contrary intention”, and thus avoid such a scenario from occurring. Some examples of doing this include:

  • a condition that the named beneficiary must be alive on the testator’s date of death to receive the gift;
  • a gift-over to specific persons or a gift-over to the residue of the estate; and
  • a general statement that Section 31 is not to apply to any gift in the will.

The above strategies are the best ways for counteracting the application of Section 31 to a lapsed gift, as more ambiguous methods have been the subject of estate litigation. For example, in Dodge (Litigation Guardian of) v. Dodge Estate, [1993] O.J. No. 2031, 15 O.R. (3d) 422, the Ontario Court (General Division) determined that Section 31 applied to a devise of property to a beneficiary despite the fact that the devise, in the will, was accompanied by the phrase “for his own use absolutely”, as the phrase did not clearly demonstrate the requisite “contrary intention”. In Dewitt v. Taggard Estate, [2006] O.J. No. 3209, 2006 CarswellOnt 4822, the Ontario Superior Court of Justice confirmed that a “contrary intention” must be in the will itself, and that one cannot use evidence about intent, including evidence of family relationships or even notes from the will-drafting lawyer, to prevent the application of Section 31 to a lapsed gift.

It goes without saying that an estate lawyer should do whatever possible to make their client’s intention clear in the will, as this can protect their client’s estate from costly and emotionally exhausting legal battles. This is one of those instances where a few words can save a few years of trouble, so estate planning lawyers should go over these principles with their clients to ensure that the client’s will unequivocally reflects their intentions.

 

 

[1] The doctrine of “lapse” is the common law principle that applies when a gift is made through a will to a beneficiary who dies before the testator. Under the common law, such a gift fails and falls back into the residue of the estate. Anti-lapse provisions thus operate to ensure that a gift does not lapse, or in other words, does not fall back into the residue of the estate.

About Corina Weigl
Corina Weigl is a partner in the Trusts, Wills, Estates and Charities group at Fasken, a leading international law firm with over 650 lawyers and 9 offices worldwide that offers comprehensive estate planning, estate administration, personal tax planning, charitable giving and estate litigation services. Email: cweigl@fasken.com

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