Estate Planning

Not So Fast: Disclaiming a Bequest and Acceleration

By Hull and Hull LLP

What happens if a Will gives a life interest in an estate to A, with a gift over to B, C and D, or their issue alive upon A's death, and A decides to disclaim her interest in the estate?

This issue was considered in Clarke v. Di Bella, 2010 BCSC 505 (CanLII).

There, the testator made a Will that provided that until the death of the survivor of the testator or A, the Estate was to pay the income and capital, as the trustees may decide, to A. Upon A's death, the residue was to be divided amongst B, C and D. If any of B, C or D was to predecease A leaving children, then that person's share would go to their children.

A decided to renounce her gift, and have the residue pass to B, C and D immediately. That is, the gift to B, C and D would be accelerated.

The Public Guardian and Trustee opposed, taking the position that acceleration of the gift was contrary to the intentions of the testator, and that acceleration would disentitle the children of B, C and D from a possible inheritance.

The Court disagreed with the PGT's position, and allowed the acceleration. It held that from a review of the case law, there were four clear principles that applied:

a.                  Acceleration is presumed unless there is an indication to the contrary;

b.                  In assessing whether there is an intention to the contrary, the court must look at both the instrument and the surrounding circumstances;

c.                  The instrument must be examined in its entirety, and clauses must not be examined in isolation; and

d.                  The intentions must be viewed, as nearly as possible, from what would be the views of the testatrix, applying an objective standard.

While many cases have disallowed acceleration, the court did not feel that the present circumstances prevented acceleration.

The court did, however, agree that the intention of the testatrix was that no beneficiary would receive a bequest before the age of 25, and imposed a restriction on distribution before the beneficiaries turned 25.

Thank you for reading.

Paul Trudelle

Full post as published by Toronto Estate Law Blog on August 04, 2010 (boomark / email).