Claims to Return Assets to the Estate

Our previous blog post “Wills Variation – Who Can?” explored who can challenge a will. Generally, a married or common law spouse or children of the deceased can bring a wills variation claim if they believe the deceased did not meet their moral and/or legal obligations. Under these types of claims, the court can decide to allocate more assets which form part of the estate to the plaintiff.

 For a testator, the risk of a beneficiary filing a wills variation claim may incentivize them to deplete their estate, leaving few or no assets subject to such a claim.  For example, a testator may choose to do this when they have estranged relationships with one or some of their children. Sometimes, depleting their estate may be “accidental” if they add someone as a joint tenant to their property, but actually intend the property to be an estate asset to be divided up among their beneficiaries.

A testator may deplete assets in their estate by registering assets in joint ownership with right to survivorship, directing beneficiary designations, or making inter vivos transfers.

-          In a joint ownership or joint tenancy agreement, the interest of the deceased joint tenant passes to the surviving joint tenant(s).

-          By directing beneficiary designations, the asset transfers outside the estate to the designated beneficiary. For instance, pension plans typically have a designated beneficiary.

-          While still alive, the testator can make inter vivos transfers (gifts) to anybody they please. These assets are given away before the estate is dealt with.

 A claim to return assets to an estate is, in a sense, a step up from a wills variation claim. Disappointed beneficiaries must succeed in attacking these planning steps and clawing the assets back to the estate in order for them to be distributed either pursuant to the Will, or for the purpose of the wills variation claim.

Common reasons to claim assets back into the estate include:

-          Assets were transferred under undue influence or coercion.

-          Assets were removed due to mismanagement or fraud.

-          Transfers were not intended to be true gifts and they are held by resulting trust to the benefit of the Estate.

 Undue Influence / Coercion

These are often difficult claims to establish because if a person is mentally acute, independent, and/or strong willed, it is difficult to establish that they are vulnerable or dependent on another person. It must be established that the influence was “influence which overbears the will of the person influenced so that in truth what she does is not his or her own act”. That being said, if it can be established that a person exercised undue influence over the deceased (or was in a position of a fiduciary over that person), it is sometimes possible to obtain an order to return any assets that were depleted from the Estate.

Mismanagement / Fraud

Where fraud can be proven, the Court will order the return of the asset to the Estate. Trying to prove fraud comes with its own risks of increased costs awards if you are unsuccessful.

True Gifts

To be a “true gift” or a legally binding gift, it must meet two requirements. First, it must have been intended to be a gift. and second, all necessary steps must have been done to transfer it to the recipient. The presumption where a transfer has been made to an adult (even an adult independent child) is that it was not a gift. The recipient must prove that the transferor intended it to be a gift.

In a recent decision from the BC Supreme Court, Franco v Franco Estate, 2023 BCSC 1015, the deceased father made certain planning decisions prior to his death. He transferred multiple assets to one of his children and changed his will to leave his entire estate to that child. His two other children were left with no share of the transferred assets and were disinherited under the will. If the court was to uphold the planning and transfers, the estate would contain very few assets available for a wills variation claim. The court concluded the gifts to the child were valid, and the assets passed outside the estate. The plaintiffs’ claims were dismissed.

 Each claim is unique and complex. We urge anyone who is considering making a claim to return assets to the Estate to seek legal advice and representation.

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© Albert & Co. Law LLP. The contents of this article do not constitute legal advice. Readers should seek legal advice in relation to their own specific circumstances.