I recently had a discussion about pour over clauses which sparked my curiosity! After some research I considered in what estate planning context this tool might be used and, as with everything, the pros and cons.
In the United States, where pour over clauses appear to be used more commonly, where they are part of an estate “back-up” plan whereby a person establishes an inter vivos trust (“trust”) intended to hold all of their assets and a Will that includes a pour over clause (“pour over Will”) to deal with any assets that were inadvertently not moved into the trust, either in error or because the person died before the assets were moved. This sounds like a fairly solid estate planning option since, (i) probate might be avoided and, (ii) the assets in the trust can be dealt with easily and without delay.
In Canada, the British Columbia Supreme Court decision in Quinn Estate, 2018 BCSC 365, the pour over clause in Pat Quinn’s Will was determined to be invalid because the Quinn Family Trust was a revocable, amendable trust which could be amended later without complying with the formal requirements in BC to make a valid Will.
Pat’s Will was prepared by a U.S. lawyer and signed in Vancouver, B.C. in 2014. Pat’s Will dealt with his Canadian assets and it provided that the residue of Pat’s estate pour over into the Quinn Family Trust, which was established in the U.S. in 1996 by Pat and his wife, Sandra, as a revocable, amendable trust. The trust was, in fact, amended after Pat executed his Will although the amendments were only administrative in nature.
After considering the grounds for appeal, the British Columbia Court of Appeal decision in Quinn Estate, 2019 BCCA 91, held that the pour over clause in Pat Quinn’s Will was invalid. As a result the residue of Pat Quinn’s estate would be distributed in accordance with the laws of intestacy in BC.
In an earlier BC Supreme Court decision, Kellogg Estate, 2013 BCSC 2292, the court provided that the pour over clause in the Will of the deceased, Robert Payne Kellogg, was invalid because the trust was amendable, which meant that it would be difficult to determine who the ultimate beneficiaries were going to be and because future amendments to the trust did not comply with the formal requirements in BC to make a valid Will.
From these cases and many other Canadian cases dating back to 1929, the main issues appear to be:
- Inter Vivos Trusts
- amendable – the ultimate beneficiaries cannot be ascertained and the testator is in effect, reserving the power of making future dispositions without a duly attested Will; and
- revocable – a possible intestacy is created if the trust is not in existence on the death of the testator and alternative dispositive provisions have not been made in the Will.
- Incorporation by reference in Wills – the document to be incorporated by reference must already exist on the date the Will is signed which may not be possible where the trust is revocable or if it can be amended after the date of the Will. In addition, the terms of the trust are not technically being incorporated into the Will but rather you are turning over the residue of the estate to the trust, to be dealt with as part thereof.
Question of the Hour! If the inter vivos trust could not be amended or revoked would the court’s decision have been different?
At first glance, using pour over clauses as an estate planning tool, in conjunction with an inter vivos trust, would appear to be an interesting and effective option. Given the complexities involved and the outcomes so far, it appears that the more sound approach is to mirror the dispositive provisions of the inter vivos trust in the Will.
FUN FACT‼ Most of us know Pat Quinn as a hockey player, coach and general manager with the National Hockey League, but here’s a fun fact that I didn’t know, Pat was also a lawyer and grew up in Hamilton, Ontario, Canada eh!