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Challenging a Will because of “Undue Influence”

The basic purpose of a Will is to allow individuals to set out their final wishes and instructions as to how their affairs should be handled after they pass away. Therefore, the Court will not set aside a Will lightly.

 

Often when a Will is challenged “undue influence” is one of the primary grounds. Although it may seem obvious to the Will challenger that the testator was influenced by an ill-intentioned friend or relative, because a Will challenge takes place after the testator has passed away, the testator is unable to say what really happened.

 

Understandably then, the threshold for establishing a Will was the product of undue influence is high. In Banton v. Banton the Superior Court of Ontario stated it must be “…established on the balance of probabilities that the influence imposed by some other person on the deceased was so great and overpowering that the document reflects the will of the former and not that of the deceased.”

 

Although the facts of each case are unique, there are certain indicators of undue influence which have been noted in the case law, including:

  • The testator is depending on the beneficiary for emotional and physical needs;
  • The testator is socially isolated;
  • The testator has experienced recent bereavement; and
  • The testator has made a new will not consistent with prior Wills.

 

Simply showing there was opportunity or motive to unduly influence a testator, however, is not sufficient to prove undue influence.

 

Considering the high threshold and evidentiary hurdles for challenging a Will, those considering a Will challenge should evaluate their options by consulting with a lawyer experienced in estate litigation.

Over half of Canadians Still Do Not Have a Will

A recent poll by the Angus Reid Institute confirmed half of us Canadians (51%) still do not have a Will, while another 15% have out-of-date Wills.

The poll also probed the reasons so many Canadians are not getting around to having a Will written. 25% said the main reason was they are “too young to worry about it”, while another 23% said it was because “I don’t have any assets to worry about”. Other reasons included “it’s too expensive to get a Will written” (18%), “I don’t want to think about dying” (8%) and “it’s too time consuming to get a Will written” (5%).

Regardless of your age, having a Will is extremely important, and is well worth the time and expense.

A Will is a legally binding document allowing you to decide who will manage your money and property after you pass away (your Estate Trustee), and who will get your money and property.

Generally speaking, there are several benefits to making a Will. Doing so will allow you to:

  • Decide who will handle your estate and distribute your assets
  • Decide who will receive your assets in accordance with your wishes
  • Reduce or defer taxes
  • Avoid disputes and litigation (e.g., by providing directions for special property or items)
  • Create trusts, (e.g. for minor children)
  • Donate to charity upon death

After learning this, the next question people usually ask is “what happens if I die without a will?”

There are rules (set out in the Succession Law Reform Act) for what happens to your property if you die without a Will (known as dying intestate).

These rules are inflexible, and may end up benefiting the wrong people, at the wrong time, and in the wrong way. The rules are:

  • If you have a spouse, but do not have children, your entire estate will be left to your spouse
  • If you have a spouse and one child, your spouse will receive the “preferential share” (the first $200,000). The remainder will be divided between your spouse and child 50/50.
  • If you have a spouse and more than one child, the first $200,000 will go to your spouse. The remainder of the estate will be divided as follows: 1/3 to the spouse, 2/3 to the children, divided equally. If only grandchildren survive, they would share the estate equally (per capita).
  • If you have children, but are not married, all children share the estate equally
  • If you do not have children or a spouse, your entire estate will go to your parents. If both of your parents are deceased, your siblings will share in the estate equally
  • If there is no next of kin, the estate escheats or goes to the Crown (government).

In summary, a Will allows you to plan your estate by choice instead of default. Although you may write a (holograph) Will entirely in your own handwriting and sign it without witnesses, it is preferable to have your Will prepared by an estate planning lawyer who develops an understanding of your needs and drafts according to your objectives.

Now that you understand the importance of having a carefully prepared Will, make sure you are not part of the 51% who have not planned ahead!

We can help.

The EAT Audit

As with your income taxes, Estate Administration Tax (EAT) can be subject to a dreaded audit.

 

For EAT purposes, only assets that are probated (those that fall under the Will in which an estate certificate is obtained) are required to be reported. That means if a testator has two Wills and only one of them needs to be probated, the other does not need to be reported. Although this is the case, the Ministry of Finance required copies of all wills.

 

During an audit, the Ministry can require documentation for each asset included in the application for probate. If the assets are extensive, this can be quite the undertaking to provide. Even after this documentation is provided, the Ministry may still request further clarification on certain assets.

 

While an audit may be unavoidable, an Estate Trustee can take steps to ensure the process goes as smooth as possible. When reporting the assets on the Estate Information Return (EIR), the Estate Trustee should do their due diligence when determining what assets must be included for tax purposes. For assets that are difficult to categorize (such as a contingent interest in property) legal advice should be sought. Once the assets to be reported are identified, the Estate Trustee should ensure they are properly valuated. For assets such as real property or commercial interests, this may mean getting several formal opinions as to their value. This is always a delicate balance in that valuations can be costly, but in the event of an audit the Estate Trustee must be able to defend their valuation.

 

During the administration of the estate, it is a good idea for Estate Trustees to do an interim distribution, and hold back some of the assets in case the estate is audited and found to owe more taxes. Unfortunately, the Ministry can audit the estate for four years from the date when taxes become payable. For a conservative Estate Trustee who wants to minimize liability, this can mean waiting four years until the administration of the estate is complete.

 

Audits are never fun, and an Estate Trustee must always be mindful they are a real possibility when administering the estate. It is important to do the work on the front-end, seek the advice needed, and take the time to complete EIR forms properly to minimize the stress of the audit process.