The government of British Columbia is proposing new legislation to be called the Wills, Estates and Succession Act which is expected to be enacted in the fall of 2011 (“WESA”). The WESA is designed to consolidate and modernize the Wills Act, the Wills Variation Act, the Estate Administration Act and the Probate Recognition Act. The drafters of the WESA have attempted to make the language more understandable and be consistent in terms of the treatment of common law spouses and legally married spouses, for example. Ancillary changes are also being proposed for the Rules of Court which deal with probate (proving) the will and administering the estate.

Intestacy. When a person dies without a valid will the estate was formerly governed by the Estate Administration Act and will now governed by WESA. It is important to note that the following assets may not form part of the estate: 1) Life Insurance – this is governed by the Insurance Act and the designation of a beneficiary in the policy and does not form part of the estate unless the estate is designated as a beneficiary; 2) Registered Retirement Plans and Pensions – this is also governed by a designation in the plan itself; and 3) Jointly held property (as opposed to property individually owned or held as tenants in common). So, even without a valid will the foregoing property could be distributed according to the applicable designation or to the surviving joint owner.

Where a person has assets other than the foregoing, and dies, the assets will now be distributed according to what is known as Parentelic distribution where there is no spouse or immediate descendants. Under WESA the spouse gets all the household furnishings and the first $300,000 of additional assets and one half of the balance of the estate. If there are issue (children) from a previous marriage the spouse gets $150,000 (instead of $300,000). WESA abolishes the interest of a spouse in the family home but does give a spouse the right to acquire the home within 180 days of death. Spouse includes a common law marriage or a marriage-like relationship for at least two years prior to death.

Wills Variation. Under Division 6 of WESA a spouse or child (natural or legally adopted) of a person making the will can apply to the court alleging that the will did not make adequate provision for the proper maintenance and support of the spouse or child. This would include adult children but exclude step children. Such a claim has to be made within 180 days from the application for probate. If one is concerned about wills variation, the party may wish to dispose of assets during one’s lifetime, or to a trust, to avoid a wills variation application.

One possibility for someone age 65 and over is to transfer assets to what is known as an “alter ego” trust, which in general terms is described as a trust that the taxpayer was entitled to receive all the income of the trust that arose before the taxpayer’s death and no person except the taxpayer, taxpayer’s spouse or common-law partner was entitled to use of any of the income or capital of the trust. The alter ego trust also has the added benefit of eliminating probate fees, but that saving has to be offset against the cost of establishing and administering the trust. Unlike a transfer to a regular trust, the transfer to an alter ego trust is not a taxable disposition. The other option is to transfer assets to a more conventional family trust where the person no longer has entitlement to the assets. In both cases the provisions of the Trustee Act would govern.

WESA also contains provisions which give the court some ability to cure a defect (e.g. improper attestation) provided the court is satisfied that the document represents the deceased’s testamentary intentions.

Survivorship. Practically speaking it is very rare for spouses to be killed in a joint accident. Historically to avoid a problem if spouses died in a joint disaster, the younger person was deemed to have survived. WESA changes that rule to provide that a joint tenancy arises unless there is a contrary intention in the will. Most wills have probably been drafted with the notion that the younger survives and should be reviewed in light of the changes proposed by WESA. As an example, typically cash gift amounts are intended to be paid only from the survivor’s estate. Based on the proposed change to WESA a typical pre-WESA drafted will could be interpreted to provide a double gift (i.e. one from each deceased) or potentially no gift. With the WESA changes and a joint death there could technically be two survivors. Keep in the mind that for insurance purposes, the insured survives the named beneficiary in a common disaster, such that the insurance proceeds would go to the insured’s estate.

New General Provisions. While most people making a will use a lawyer or a notary, beware of making one on your own or using an outdated will kit. Under the WESA a will is no longer revoked on a subsequent marriage. A will may now be made by persons 16 years or older (formerly the minimum age was 19). However, witnesses to a will must be 19 years or older. Gift to witnesses of a will or their spouses are void but an application can be made to a court to have the gift declared valid. The court will likely rely on extrinsic evidence to determine the will-maker’s intention.

Abatement of Gifts. Sometimes an estate is not large enough to satisfy all debts and gifts, so the issue is what happens. WESA provides a new code in terms of how assets are reduced – property specifically charged with a debt; property distributed as an intestate estate and residue, general demonstrative and pecuniary (cash) legacies, specific legacies, and property over which the will maker had a general power of appointment. Another issue is where property is encumbered by either a personal property security interest or a mortgage. Under WESA the beneficiary receiving the property is responsible for the portion of the debt attributable to acquisition, improvement or preservation of the encumbered property subject to a contrary intention in the will.

Another new rule is that where a beneficiary who is a child or sibling of a will maker, predeceases and no alternative beneficiary is named, only descendants of a predeceasing beneficiary take. Where no alternative beneficiary is named, the failed residuary gifts go to the surviving residuary beneficiaries.

A related issue is the tax liability of a registered plan that is triggered on the death of a surviving spouse. If a designation of the plan proceeds is made to a particular person, technically the estate can be liable for the tax on the deemed disposition of the plan (typically at top marginal rates). If the person entitled to the designation is different than the other beneficiaries of the estate, this could result in unintended consequences.

Summary. A will is a living document which should be reviewed periodically, particularly for changes in guardians of minor children and for changes in circumstances. With the coming advent of WESA this is probably an opportune time to review succession plans to ensure that the original intent is carried out (e.g. right of survivors in a mutual disaster situation). Some of these situations are relatively rare but do nonetheless occur. In addition to trusts, one should also consider power of attorney (in the case of subsequent mental infirmity), which can apply to everything while the person is alive except health care decisions, and health care representation agreements to give one or more persons authority to make critical health care decisions on one’s behalf when unable to do so.

*The foregoing is intended to be a general summary only and does not constitute legal advice.