Generally speaking, wills and estates lawyers are a conservative bunch—if something has worked well enough in the past, why try something new? Sometimes, however, even this cautious group recognizes the necessity of change. Accordingly, after many years of consultation, the Wills, Estates and Succession Act (WESA) became the law of the land in the spring of 2014, consolidating numerous other pieces of legislation into a single act meant to make life simpler, fairer, and more predictable.
Changes under WESA
Aside from a) consolidating many different pieces of legislation into a new act written in plain language and b) streamlining the probate process, WESA has led to several other significant changes, including the following:
Wills no longer revoked upon marriage
Before WESA, your Will (capitalized throughout this article for clarity) was deemed void upon marriage unless it contained a statement indicating that it had been drafted “in contemplation of [said] marriage.” This meant that the intestacy rules applied if the “Will maker” (the new term for a testator or testatrix under WESA) failed to update their Will prior to death.
Under WESA, however, pre-marriage Wills will remain valid, which means that a new spouse will have to launch a legal challenge in order to claim a share of their deceased spouse’s estate. On the downside, a successful Will challenge could ultimately cost the new spouse a lot of money; on the upside, any safeguards (i.e., trusts for minors or at-risk heirs) and contingency planning in a pre-marriage Will will remain in place. Moreover, a spouse who successfully challenges a pre-marriage Will may actually end up receiving a greater share of their late spouse’s estate than they would have received under an intestacy.
The new process also allows the court to craft the best solution for the circumstances, rather than forcing the heirs to accept the inflexible formula that applies in the event of an intestacy.
New provisions governing how assets are divided in a common disaster
Under the old act, if spouses died simultaneously, the law presumed that the older person died first. This meant that unless the older spouse’s Will planned for the possibility of simultaneous death, any gifts intended for the younger spouse would go directly to the younger spouse; moreover, the younger spouse would also inherit all jointly owned assets. These rules differed from those applicable to the distribution of life insurance proceeds in the same situation; in the case of life insurance proceeds, neither spouse is presumed to have survived the other, which means the money ends up going to contingent beneficiaries, or—if none exist—the policy-holder’s estate.
This disparity between survivorship rules for life insurance proceeds and estate assets not only created confusion—it also left the door open for enormous injustices if a couple died intestate or if their Wills didn’t cover the possibility of a simultaneous death. In both cases, the younger spouse’s family or chosen heirs could ultimately inherit all of the couple’s assets, leaving the elder spouse’s family or chosen heirs with nothing.
The revised rules are similar to insurance law and eliminate the potential for the injustices described above. Now, if the order of death is unclear or if both owners die within five days of each other, neither will be presumed to have survived the other, and the secondary beneficiaries of each deceased spouse will inherit. Moreover, if such spouses jointly own an asset such as land or a bank account, ownership will be severed so that each owns a separate 50% share, which can be distributed in their individual Will(s); or, in the event that both spouses die intestate, each spouse’s relatives will automatically split 50% of the joint assets.
While the added clarity provided under WESA is a definite benefit, the new provisions also have some drawbacks. For example, if a Will isn’t drafted carefully, a beneficiary slated to receive identical gifts from a couple on the death of the last surviving spouse could end up double-dipping if both spouses die at the same time. Now that neither spouse will be deemed to have survived the other, and if each Will pays out the same gift to the same person in the event that the other spouse does not survive the Will maker, their beneficiary could ultimately get paid twice!
Changes to what happens if a group of beneficiaries die at the same time
Under the new rules, if an entire group or “class” of beneficiaries, such as your children, die at the same time, the gift will be divided equally among them all and essentially paid to their estates, unless your Will stipulates otherwise. Accordingly, if you want your grandchildren to inherit rather than, say, your children’s spouses, it remains vital to specify this intention in your Will; otherwise, your children’s own Wills or the intestacy laws will apply, and your grandchildren may not receive as big a share of your estate.
Until WESA, only life insurance policies and other life insurance products could name a trustee as a beneficiary. Now, owners of registered plans can do the same thing through either a separate trust document or through a special clause added to the Will, which means these assets can easily get the contingency planning, inclusion in trusts, and probate avoidance that has always been available for life insurance policies.
Posthumous birth rules codified
In this era of frozen reproductive material, it is theoretically possible for someone to engender children many years after they themselves have passed away. The new rules now require that a surviving spouse advise the court of the intention to use the reproductive material within 180 days of the donor’s death, and that the birth take place within two years of the deceased’s passing. The old rules did not address this scenario in detail.
Rules surrounding “undue influence” changed
The elderly are particularly vulnerable to manipulation, isolation, and coercion when writing their Wills. Under the old law, if a relative alleged that another beneficiary (such as a caregiver) had exerted undue influence over the deceased, the burden of proof fell on the relative. Under the new law, however, the tables have turned: Now, if such concerns are raised, the onus shifts to the beneficiary of the gift, who must prove that they did not exert undue influence on the deceased. How this shall be established remains to be determined, although it’s likely that evidence from the lawyer who prepared the Will will play a key role.
Will requirements relaxed
Until WESA, a gift to a beneficiary was rendered void if said beneficiary also acted as a witness to the Will in question. Fortunately, there are now provisions in place that could enable people who are both witnesses and beneficiaries to inherit, along with other provisions to correct Will mistakes. Unfortunately, however, it is now possible to argue that a document or electronic communication executed in a non-traditional manner is a valid Will.
Most lawyers believe that this last change will create far more problems than it will fix. For example, imagine a scenario in which an individual doesn’t get around to signing the draft copy of their Will before passing away. Did they actually intend to sign this draft or did they have a change of heart? Was the draft incorrect? And what about a typed and signed note left instead of a Will—was it written under duress or perhaps even forged?
New division of assets if someone dies intestate
In the past, many a bereft spouse received less under an intestacy than if they’d actually divorced their now-deceased spouse. For example, if the deceased had more than one surviving child from various relationships, the surviving spouse would receive only the first $65,000 from the deceased’s estate, as well as the right to live in the family home for life and a third of whatever else was left.
Now, however, the surviving spouse inherits the first $150,000 from the estate if the deceased spouse had children from a prior relationship, or $300,000 if they shared the same children; in both instances, the surviving spouse also receives at least 50% of the remaining assets. And while the survivor no longer automatically gains the right to reside in the family home for life, they do get the right to purchase it or take it as a share of the inheritance. Moreover, if they can’t afford to buy the home outright, the court can now allow the surviving spouse to continue living in the home and pay interest to the other heirs on the portion of the house that the surviving spouse couldn’t afford to purchase.
All the same, this solution is probably not what most families would desire, particularly in the case of a first marriage with children, where the surviving spouse commonly receives everything under a Will. For one thing, this division of assets has the potential to trigger tax that could have been deferred through a spousal rollover if there had been a Will leaving everything to the spouse or to a qualifying Spousal Trust. As the intestacy rules will still apportion part of the estate to the children, most of the assets allocated to the children would trigger taxes on the deceased’s terminal tax return—taxes that would otherwise have been avoided. This can be particularly devastating if, for example, the deceased was the sole owner of rental or vacation property or the sole shareholder of a successful corporation.
Moreover, the new rules still leave the Public Trustee in charge of administering any assets received by minor and/or at-risk heirs; this also means the assets will be distributed directly to the minor heirs when they turn 19.
Judges now able to order estates to pay maintenance to spouses and/or children
The current provisions provide a clear framework that explains how someone can apply for support and outlines options regarding how the support is to be paid.
Time will tell
To say that WESA had made wholesale changes to the world of Wills and estates in British Columbia is an understatement. While the next few years will reveal how the new provisions play out in practice, the early consensus is that the benefits should far outweigh the challenges.
Colin S. Ritchie is a lawyer and financial planner based out of Vancouver. The original version of this article appeared on his blog at http://colinsritchie.com.