Ruling could affect thousands of wills

A judge with the Ontario Superior Court of Justice decided the validity of two nearly identical wills this month, finding that one of the wills was invalid because in leaving the assets to the discretion of the trustees it failed to “describe with certainty” any property that is subject to the will.

Lawyers say the decision could possibly nullify wills across the province, even those drafted by the province’s most esteemed lawyers.

The case centres on the basket clause, a way of drafting multiple wills to enable the trustees to determine what assets fall into either will, rather than enumerating each asset in one of the wills.

Basket clauses are used in cases of multiple wills accepted for probate since 1998, says Pia Hundal, a partner at Dentons Canada LLP and chairwoman of the Ontario Bar Association’s Trusts and Estates Law section.

“This is the first time, to the best of my knowledge, that the basket clause has been tested in a written decision of the court,” says Hundal, who was not involved in the case.

“I know for sure there are a number of established and very well-respected estate planning lawyers in Ontario that do use basket clauses and are very concerned right now.”

Hundal says that, prior to the decision, the estate planning bar in Ontario was split on whether or not to use basket clauses because they hadn’t really been tested yet in the sense that there hadn’t been a case where the judge looked at the validity of the basket clause.

The Sept. 11 decision, Milne Estate (Re), 2018 ONSC 4174, was argued by WeirFoulds LLP lawyer Clare Burns and Anastasija Sumakova, formerly of WeirFoulds LLP, before Justice Sean Dunphy in Toronto.

The case revolves around a couple, the Milnes, who died in October 2017 and left their daughter, accountant and lawyer as executors of the estate. There were two wills for each of the deceased, a primary will and secondary will, which Dunphy called “materially identical” save for specific language.

At the centre of Milne, wrote Dunphy, was the question: “Is a will that grants the executors the discretion to determine what property is subject to the will a valid will?”

The disputed language in the primary will said the executors were in charge of “all property owned by me at the time of my death EXCEPT. . . [certain named assets and] any other assets for which my Trustees determine a grant of authority by a court of competent jurisdiction is not required for a transfer or realization thereof.” The wording in the secondary will said “all property owned by me at the time of my death INCLUDING . . .  [certain named assets and] any other assets for which my Trustees determine a grant of authority by a court of competent jurisdiction is not required for the transfer or realization thereof,” with emphasis added by Dunphy.

In the decision, Dunphy referred to an affidavit from the lawyer executing the estate who certified that the primary will was in force and had not been revoked by the secondary will. 

The trustees argued that the probate function of the court is “a separate and distinct function” from the construction of the will, the decision said. However, the judge ultimately decided that the secondary will was valid and the primary will was not valid. “The Secondary Will includes all of the property of the testator of every kind without exclusion. It overlaps the Primary Will completely. There is no gap,” Dunphy wrote.

He concluded that using the opinions of the trustees to determine what is desirable to include in each will “cannot be done.”

Burns declined to comment on the case and declined to comment on whether the decision would be appealed.

Jordan Atin, counsel at Hull & Hull LLP, who was not involved in the case, says some assets in an estate require probate from the court if they involve a transaction with a third party, such as a bank, that needs to check if the will is valid.

Atin, who is a Law Society of Ontario-certified specialist in Estates & Trusts Law, says that other assets, such as furniture, might not need probate, which is important in determining probate taxes and fees.

“There are thousands of these wills in Ontario that, if Justice Dunphy’s decision stands, are invalid. All these people who have these wills, when they die, now they don’t have a will to deal with those assets,” Atin says.

“It’s a very big issue for lawyers who drafted wills that way. These wills have been accepted for 20 years. Nobody thought they were invalid.” 

Barry Corbin, who practises at Corbin Estates Law PC in Toronto, says it’s unclear why Dunphy saw fit to pronounce on the validity of the secondary will, a question that was not before him.

Jonathan Friedman, estate litigation lawyer at Heft Law PC in Richmond Hill, Ont., says the broad basket clauses in Milne were uncommon enough that he hasn’t come across them in litigation.

But, he says, Dunphy relies on a decision, Neuberger v. York, 2016 ONCA 191, that Friedman says has “changed everything” in clarifying the court’s role in probate. In Milne, Dunphy referred to Neuberger and said the court’s role is “inquisitorial” and the court’s function and obligation is to “ascertain and pronounce what documents constitute the testator’s last will and testament.”

Atin says Dunphy’s decision was “very dramatic” given that Milne was subject to the process of being admitted to probate, which often does not even come before a judge but is instead completed by a registrar. Hundal says practitioners who drafted these types of wills may want to consider contacting clients to update their estate plans.

“I know a lot of people are also worried because there are circumstances where you might have drafted a primary and secondary will for a client and then the client has become incapable of making a new will,” Hundal says.