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Estate planning and the legal system: Part 3

Guide Legal: If you wonder about challenging a will — don’t wait too long

If you are a beneficiary under a will, there is one thing you should know. If you believe you have been treated unfairly, voice your concerns immediately and take action. While you might feel inclined to assist in the administration of the will and collect your share of the assets, don’t. Otherwise, you may be prevented from later challenging the will and objecting to the manner in which the estate is distributed.

In a recent case, the court dismissed a beneficiary’s will challenge, in part because he actively participated in the distribution of the assets of the estate in question and as a result appeared to have accepted the terms of the will he then challenged.

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Close-up of last will and testament document

The case involved the estate of Eleanor Leibel, who passed away in 2011. She left behind two sons, Blake and Cody, and a husband from whom she was separated for many years. In her last wills and testaments, of which there were two, she named her sister and husband as estate trustees. At the time of her death, Eleanor’s assets consisted primarily of a house and shares of various corporations.

Following her death, Blake moved quickly to sell the house, which had been left to him under Eleanor’s wills. It sold for $5.5 million, some of which was used to pay down the estate’s tax liabilities by way of a loan to the estate. With the exception of certain shares which were left solely to Blake, the residue of the estate was left to Blake and Cody in equal proportions. As with the house, Blake acted quickly in assisting the estate trustees to liquidate the shares left to him by his mother.

One year later, before distribution of the residue of the estate to him and his brother, Blake challenged his mother’s wills. He asked the Court to declare the wills invalid. He alleged that his mother expressed wishes to him and others that he would be the sole beneficiary of her estate and that leaving the residue to him and Cody was not what she wanted.

Blake testified that his mother had been separated from her husband for more than 30 years and that Cody had been living with him (the separated husband) since age 12. He also testified that each parent was financially responsible for the son who was living with that parent.

The estate trustees took the position that Blake’s will challenge was too late and that he was statute-barred pursuant to the Limitations Act (Ontario). That Act imposes a two-year limitation period on claims calculated from the date a claimant knew or reasonably ought to have known that a claim exists. The estate trustees also argued that Blake could not legally challenge the wills given his participation in liquidating and distributing the assets of the estate from which he benefitted.

The Court dismissed Blake’s will challenge in part because he commenced his will challenge more than two years after having received a copy of his mother’s wills from the estate trustees. It found that Blake had all of the information necessary to begin a will challenge at the time of his mother’s death. As stated by the Court, “[h]e chose, instead, to take many of his benefits under the Wills before he commenced his Application.”

The Court also determined that Blake was “estopped” from challenging his mother’s wills. It found as a fact that Blake co-operated with the estate trustees to distribute the estate assets until all that was left was the residue to be divided between him and his bother, at which point he challenged the wills. The Court concluded that Blake should not be allowed to “resile from all of the actions he took during the two-year period following Eleanor’s death.”

The outcome in this case was influenced, at least in part, by the facts. First, Blake did not attend his mother’s funeral. Second, he took an active role in assisting the estate trustee to quickly liquidate the assets of his mother’s estate to his sole benefit because he needed the money. Having taken the benefit of the assets to which he was entitled under the wills, he then complained that he did not receive enough money from the estate. He sought to exclude his brother from the estate. The Court was not sympathetic to Blake’s request.

We must remember that, like us, judges are human and will not divorce the law from the situation placed before them. The facts matter. More often than not, the conduct of the parties will have an impact on the outcome of a case. Judges will consider and balance the equities. They want to do justice between the parties and deliver a fair result. So, if you are a disgruntled beneficiary, you should act in a timely manner and avoid leading others down the garden path, lest you be faced with a disgruntled judge.

Nadia Campion is a business litigator at Lenczner Slaght in Toronto. Campion’s clients include small- to medium-size businesses, individuals and associations across a range of sectors in civil litigation such as commercial disputes as well as wills, trusts and estates litigation. She can be reached at [email protected] or 416-865-2974.

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