Pouring Over Pour-Over Clauses: Vilenski Estate – The Deciding Vote?

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Case Summary: Vilenski v. Weinrib-Wolfman (2022 ONSC 2116)

Court: Superior Court of Justice – Ontario

Date: April 6, 2022

Case File No.: 21-672440-00ES

Background: In the case of Vilenski v. Weinrib-Wolfman, the Superior Court of Justice in Ontario was called upon to face an intricate matter involving the estate of the late Lynda Weinrib and the validity of various components of her testamentary documents. The court’s decision, rendered on April 6, 2022, by Justice Kimmel, provides a nuanced analysis of estate law, particularly concerning the contentious “Pour Over Clause” in the deceased’s Will.

Facts: The applicant, Tal Vilenski, as both the estate trustee and trustee of the Lynda Weinrib Alter Ego Trust, sought judicial clarity on three primary issues:

  1. The validity of a photocopy of Lynda Weinrib’s Last Will and Testament dated January 12, 2017 (the “2017 Will”).
  2. The validity of the “Pour Over Clause” within the 2017 Will, which directed the residue of the estate to be transferred to the trustees of an inter vivos trust.
  3. The rightful ownership of a condominium held in joint tenancy between the deceased and her daughter, Nicole Weinrib-Prussky, by way of survivorship.

Issues and Decisions:

  1. Validity of the Photocopy of the 2017 Will
    • The court upheld the photocopy’s validity, relying on Rule 75.02 of the Rules of Civil Procedure, given the consent of all interested parties and the non-opposition from the Office of the Children’s Lawyer (OCL).
  2. Right of Survivorship in the Condominium
    • The transfer of the condominium into joint tenancy with her daughter Nicole was found to be a legitimate gift, supported by the evidence of Nicole’s care for Lynda and the lack of consideration involved in the transfer. The court confirmed Nicole’s right of survivorship.
  3. Validity of the Pour Over Clause
    • The clause intended to transfer the residue of the estate into the Lynda Weinrib Alter Ego Trust. However, the court found this clause invalid, following the reasoning of the British Columbia Court of Appeal in Quinn Estate. The primary concern was that the Pour Over Clause allowed for potential amendments to the trust without adhering to the formalities required for testamentary documents, which could undermine the safeguards against fraud and undue influence.
    • As a result of invalidating the Pour Over Clause, the residue of Lynda Weinrib’s estate, amounting to approximately $18,000, would be distributed by intestacy laws.

Reasons: The court acknowledged competing precedents from other jurisdictions, notably the contrasting views from British Columbia and Nova Scotia. In British Columbia, pour-over clauses were found to be invalid in the Quinn Estate cases and in the case of Waslenchuk Estate, while Nova Scotia upheld them on the basis of the rules applicable to semi-secret trusts. Ultimately, Justice Kimmel favored the British Columbia approach, choosing to emphasize the importance of maintaining stringent formalities to prevent potential abuses. Further, Justice Kimmel indicated that the decision in the case should be in rem rather than in personam, despite the request of counsel in the case.

Concluding Comments about Pour-Over Claues:

The Vilenski v. Weinrib-Wolfman case serves as a crucial reference for estate practitioners in the ongoing discussion regarding the legal validity of pour-over clauses in Canada. It highlights the judicial scrutiny applied to testamentary clauses and the importance placed on adhering to statutory and common law formalities. It also illustrates the complexities inherent in modern estate planning, particularly when inter vivos trusts are involved.

To recap the results in the cases discussed in this blog series, here is what the four cases found and why:

  1. Quinn Estate reasons for invalidating pour-over clauses:
    1. The doctrine of incorporation by reference could not apply because the trust (document) was amendable and revocable;
    2. The doctrine of facts of independent significance was deemed inapplicable as allowing it would undermine statutory formalities;
    3. Section 58 of WESA was stated not extend to curing substantive invalidity.
  2. Waslenchuk Estate reasons for invalidating pour-over clauses:
    1. Testamentary documents, such as a Will, must reflect the testator’s fixed and final intentions and the inclusion of a pour-over clause offends this requirement;
    2. The testator was resident in BC at the time of her death and this is what determines the law applicable to the validity of her Will. BC law does not permit pour-over clauses;
    3. The Quinn Estate cases were found applicable and the court likened pour-over clauses, directed to an amendable and revocable trust, to an unattested codicil.
  3. MacCallum Estate reasons for validating pour-over clauses:
    1. A semi-secret trust was found to exist at the time the testator’s Will was executed.
  4. Vilenski Estate reasons for invalidating pour-over clauses are stated above.

In each of the blogs where pour-over clauses were found to be invalid, I raised questions about whether the decisions where correctly reached having regard to all applicable law, analogous structures, and the practical implications of the decisions. The MacCallum Estate decision is the outlier in the debate regarding pour-over clauses and appears to be based on sound law that has existed for many years. Of equal or greater importance, it offers hope for addressing the practical reasons why Canadians are resorting to a planning technique that is valid in other jurisdictions including those with which they have an estate planning connection (e.g. US and UK).

Why then the preference for strict formalities? This is a debate that is not unique to this narrow discussion. There is a long history of trust cases that demonstrate the tug of war between rigid common law rules and the more flexible embrace of equity that gave rise to trusts initially out of a separate judicial stream. After the merger of the courts, the common law may have been construed as the victor implying that certainty is more valuable than fairness.

This raises some interesting questions such as certainty for whom and when, and whose interpretation of fairness is to apply. As an example, it is very common for Wills to contain testamentary trusts for spouses, children, grandchildren or others for example. Any of those trusts can contain gifts over in the event the primary beneficiaries do not survive to receive the whole of the trust property, and the gifts over may be to unascertained persons. The testamentary trust provisions could include the ability to amend the trust terms or add or remove beneficiaries. To some, this might introduce a degree of uncertainty about the final intentions of the testator; however, it is legally valid.

Also discussed in one of the earlier blogs in this series, registered charities in Canada can be formed as inter vivos trusts and gifts in a Will to a charity so formed are not attacked as invalid pour-over clauses. This inconsistency could create uncertainty and a sense of unfairness.

In the complex world of modern estate planning that involves multiple jurisdictions with increasing frequency, pour-over clauses are an essential tool to align the interests of both the Canadian resident testator and non-resident beneficiaries. Another example can be found in Canadian domestic planning for beneficiaries with disabilities, where parties want to be able to pool estate distributions for maximum effect despite potentially having to forego the benefits of testamentary trust tax treatment (where available). Clients should be able to select from a full slate of options for ordering their affairs according to their dictates, rather than being constrained by fears about potential abuse they do not share or similarly prioritize.

Are pour-over clauses more subject to abuse or undue influence than Will kits?