Pouring over Pour-Over Clauses – Waslenchuk Estate

Case Summary: Waslenchuk Estate, 2020 BCSC 1929

Court: Supreme Court of British Columbia

Date: December 8, 2020

Citation: Waslenchuk Estate, 2020 BCSC 1929

Background: Janet Letourneau, the executor of the Will of Lorraine Rose Waslenchuk, brought an application seeking directions regarding the distribution of the estate. Lorraine Rose Waslenchuk executed her Will in Connecticut on November 27, 2013, and passed away in Vancouver on August 2, 2016. Her husband, Dennis Waslenchuk, predeceased her in 2015. The Waslenchuks, who had no children, lived in the United States from 1975 until 2014, when they returned to British Columbia due to Dennis’s health issues.

Facts:

1. Lorraine Rose Waslenchuk’s estate includes movables and real property in British Columbia and movables in Connecticut, valued at approximately CAD $4 million.
2. The Will was probated through the Prince Rupert probate registry, and the Trust document was attached to the grant of probate.
3. Article II.C of the Will directed the distribution of the estate’s residue to the Lorraine R. Waslenchuk Revocable Trust (“Trust”) on her death.
4. The central issue was the validity of the pour-over clause in the Will in light of the British Columbia Supreme Court and Court of Appeal decisions in Quinn Estate, which held such clauses invalid.

Issues:

1. Whether Article II.C of the Will, which purports to distribute the residue of the estate to the Trust, is valid.
2. Whether the distribution should be governed by the laws of Connecticut, where the Will was executed, or by British Columbia law.

Decision: The Supreme Court of British Columbia, presided by Mr. Justice Walker, found Article II.C of the Will to be a pour-over clause that is invalid under British Columbia law. Consequently, the residue of Ms. Waslenchuk’s estate passed on an intestacy to Janet Letourneau.

Reasons:

1. Fixed and Final Intention. The court held that a testamentary document such as a testator’s Will is meant to reflect their fixed and final intentions for the disposition of their estate on death, and further stated that those intentions may be changed by revoking a Will and executing a new one or executing a codicil to the existing one, so long as the formalities of WESA are observed.
2. Residency in BC at the time of death. The court examined the rules for determining where a person is ordinarily resident and domicile of choice (as opposed to domicile of birth which was not examined) and found that Ms. Walenchuk was resident and domiciled in British Columbia at the time of her death.
3. Application of Quinn Estate SC and CA. The court found that these decisions were binding in the present case and stated that the cases establish that a pour-over clause to an amendable or revocable trust is invalid in BC since similar to a codicil it reserves the right of the testator to make an unattested change to their Will.

The court rejected the argument that the Will and Trust together formed a composite testamentary document, as the Trust was an inter vivos trust, not dependent on Ms. Waslenchuk’s death to come into effect.

Conclusion: The court’s decision focused on formalities for testamentary documents and extended them to an inter vivos trust otherwise validly formed and subsisting, notwithstanding that such a planning strategy was valid in Connecticut where the Will was created while Lorraine resided there.

A closer examination of WESA suggests that a different decision could have been reached. The court relied on s.101 of WESA, which reads as follows:

101 This Part applies to the following:
(a) a personal representative or other person acting or intending to act in British Columbia under a will or a representation grant, wherever the will is made or the representation grant is issued;
(b) the administration of the estate of a deceased person who was ordinarily resident or domiciled in British Columbia at the date of the person’s death;
(c) the estate situated in British Columbia of a deceased person who was not ordinarily resident or domiciled in British Columbia at the date of the person’s death.
Other sections of Part 6 deal with issues such as: vesting of property on death; administration pending legal proceedings; renunciation of executorship; forfeiture of executorship; applications for grants of probate or administration; effect of grants of probate or administration, etc.

What Part 6 does not address is the interpretation or construction of Wills, which is found in Part 4 of WESA. More specifically, the interpretation of Wills is dealt with at sections 79 to 81, which read as follows:

79 (1)In this Division, a reference to the law of a place other than British Columbia is a reference to the internal law only of that place and does not include its conflict of laws rules.
(2) A requirement of the law of a place other than British Columbia that
(a) certain formalities must be observed by will-makers of a particular description when making a will, or
(b) witnesses to wills must have certain qualifications is a formal requirement only that does not affect the essential validity of the will.
80 (1)A will is valid as to the formal requirements for making the will and is admissible to probate if it is made in accordance
(a)with the law of the place where the will is made,
(b)with the law of the will-maker’s domicile, either at the date the will is made or at the date of the will-maker’s death,
(c)with the law of the will-maker’s ordinary residence, either at the date the will is made or at the date of the will-maker’s death,
(d)with the law of a country of which the will-maker was a citizen, either at the date the will is made or at the date of the will-maker’s death,
(e)with the law of British Columbia, but the will is made outside British Columbia,
(f)with the law of the place where the will-maker’s property is situated at the date the will is made or at the date of the will-maker’s death,
(g)in the case of a will made on board a vessel or aircraft of any description, with the law of the place with which, having regard to the registration, if any, of a vessel or aircraft, the vessel or aircraft is most closely connected, or
(h)to the extent that the will exercises a power of appointment, with the law governing the essential validity of that power.

(2)If a will is not valid under subsection (1), it is deemed to be valid if a subsequent amendment to the law of the relevant jurisdiction before the deceased person’s death would have validated the will.

(3)The formal validity of a will that revokes
(a)a will that would be treated as formally valid under this Division, or
(b)a provision of a will that would be treated under this Division as a formally valid provision, may be determined by reference to any law under which the revoked will or provision of the will would be treated as formally valid and that is relevant for that purpose under this Division.

81 In the construction of a will to which this Division applies, the court may resort to the law of the place where the will-maker was domiciled or was ordinarily resident at the time the will was made. [Emphasis added.]

As indicated above, ss.79 and 80 deal with formal validity whereas s.81 deals with interpretation and allows the court to consider the law of the domicile of the testator at the time the Will was made. In Waslenchuk Estate, the testator was domiciled in the State of Connecticut when the Will under consideration was made. Therefore, it was open to the court to consider the laws of Connecticut which allow pour-over clauses as stated at Paragraph 26 of the decision.

The overall structure of WESA is also helpful. The progression of sections reflects the order of how an estate unfolds. First there is a review of the formal validity of a Will to determine if it can be admitted to court for probate purposes. Next, the provisions of the Will need to be interpreted to determine the testator’s intentions so they can be carried out in the context of the overall administration of the estate. Consequently, the court in Waslenchuk Estate should have started at ss.79 to 81 rather than jumping ahead to s. 101 which deals with administration rather than interpretation.

In Canada, like many jurisdictions, legal interpretation starts first with statute and then progresses to case law. The decision in Waslenchuk Estate appears to bypass a key statutory provision and rely on the Quinn Estate decisions instead, calling the result into question.