Wife of 28 Years Receives 25% of $11 Million Estate After Court Varied Will

Ciarniello v. James, 2016 BCSC 1699

The wife of the deceased, Dr. Dominic Ciarniello, sought variation of her late husband’s will as she felt the will did not make adequate, just and equitable provision for her.  The testator left behind a sizable estate and his wife of 28 years (39 years together) and 5 adult children (3 being from previous marriage).  The will provided that after certain specific gifts, the residue of the estate was to be divided equally among his 5 children and his wife was only to receive any interest he had in the family home in Vancouver.  Under the circumstances, the plaintiff felt she was not adequately provided for. 

The claim was brought by summary trial application and, initially, the judge decided that due to a dispute over the value of the estate’s assets, the court was unable to decide the case by summary trial.  After the court received further evidence and argument, the application was resumed some months later. 

The plaintiff took the position that there should be significant variation of the will and sought a 40% interest in the residue of the estate plus the transfer of her husband’s minority (10%) interest in the company, Nicoson (she had initially sought a lump sum of $3.5 million).  The three children from the first marriage opposed any variation entirely and took the position there had been adequate, just and equitable provision for her and any variation would be unfair given the plaintiff’s assets and the actual value of the estate.  The children from the second marriage (the plaintiff’s) supported their mother’s application and only sought to ensure the 5 children were treated equally under the will. 

The estate of the testator was substantial.  The testator was a dentist and a businessman and it was found the net value of the estate at death was $11,434,597.  The plaintiff was not without a sizable estate as it was shown she had a net worth of $7,102,980. 

Decision:

The court applied Tataryn principles and looked to the legal and moral duty owed by the testator.  The legal duty owed to the plaintiff must be assessed as if he notionally separated from the plaintiff immediately before his death.  Looking at the net value of the assets and the net value of the plaintiff’s assets immediately before the date of death, the judge found the testator clearly did not satisfy his legal duty.  The plaintiff clearly received less than half of the family property at the time. 

The court looked to the plaintiff’s minimum legal entitlement, 50%, as well as the substantial moral duty owed by the testator.  The plaintiff was a loyal partner throughout their 39 year relationship and they had raised two children.  While there were other factors at play, such as heavy tax implications, which the court could not ignore, the court concluded the testator failed to discharge his moral and legal duty and did not make adequate, just and equitable provision for his wife. 

The court decided in favour of the plaintiff and provided a variation of the testator’s will so that 25% of the residue of the estate was to go to the plaintiff together with the minority shareholding in Nicoson.  The balance of the 75% was to be divided equally among the 5 children.  The court's decision did attempt to take into account the significant tax consequences (which the testator had been mindful of).

DISCUSSION

[90]        The initial question is whether, considering the legal and moral duty the testator had to the plaintiff, he made adequate provision for the plaintiff in his will. The legal duty of Dr. Ciarniello must be assessed as if he notionally separated from the plaintiff immediately before his death. The authorities indicate that is the point in time to assess whether the testator discharged his legal duty.

[91]        If I look at the net value of Dr. Ciarniello’s assets and the net value of the plaintiff’s assets immediately before the date of Dr. Ciarniello’s death, I would find that the testator clearly did not satisfy his legal duty. On that analysis the plaintiff clearly got less than half of the family property at the time. I think that is the appropriate starting point for the first part of the Landy test. I have taken into consideration that the tax liability incurred by the estate was not inevitable, had Dr. Ciarniello made his will differently.

[92]        Accordingly, I have concluded that the testator did not discharge his legal and moral duty to his spouse and in essence preferred his moral duty to his adult children. While deciding whether the testator’s duty was met I recognize he is entitled to autonomy provided his allocation of assets falls within a range of options, any of which might be acceptable. However, I find that the option the testator chose was short on his legal and moral duty to the plaintiff.

[93]        Although the evidence suggests that the testator undertook clear and deliberate estate and tax planning, and was apparently an astute businessman, I think in providing for his spouse his will was outside the range of reasonable options. It was not an adequate, just and equitable provision for her.

[94]        The evidence shows that although the plaintiff was left with a valuable home, she has not had sufficient income to meet her expenses and has drawn down considerably on her RRIF which had a date of death value of $560,000 and has no other savings. Although Nicoson had one income-earning property, the other recently sold, and it appears the plaintiff was not left with significant cash to meet her ongoing living expenses. Although the First Marriage Children say that the plaintiff received various assets during the testator’s life, the company she owns, Nicoson, is still subject to and will be subject to a substantial debt in favour of the companies held by the estate and the estate itself.

[95]        In determining whether the plaintiff made adequate provision for his spouse and children I must also consider their moral claims. I place the moral claim of the plaintiff higher and I think that any moral claim that the children had was satisfied by the terms of the will. I recognize that the Second Marriage Children have received more lavish gifts but it appears gifts for homes and cars have been provided during the testator’s life in varying degrees to all of his children.

[96]        Considering the legal and moral obligations of the testator, as described in Tataryn, and considering the size of the estate, the size of the plaintiff’s assets and the length of the plaintiff’s relationship with the deceased, I have concluded that the testator did not make adequate provision for his wife in his will. In reaching that conclusion I rely largely on what I find to be her minimum entitlement, which is 50% of the family property immediately before his death. I also rely on his moral obligation which, given all the evidence, was of a high order. The evidence shows that the plaintiff and the testator had a long-term relationship in which she was a loyal participant that persisted until the death of the testator. I find she had a strong moral claim. Although there was some dispute between the plaintiff and the First Marriage Children about work that the plaintiff did on the properties, I need not resolve that conflict as the unjust enrichment claim is only background to this claim. The testator, I find, failed to discharge his legal and moral duty in the circumstances.

[97]        Accordingly I would vary the will.

[98]        What, then, is the appropriate disposition of this claim in the circumstances? Turning to that question, I have to address what the relevant circumstances are.

[99]        The Testator owed a legal duty to the plaintiff who was his wife and partner in a long-term relationship spanning 39 years. I find that the moral duty he owed to his spouse given society’s reasonable expectations of what a judicious spouse would do in the circumstances was significant. I find that the plaintiff reasonably expected that the testator would ensure that she was adequately provided for during the rest of her life.

[100]     Although Dr. Ciarniello owed no legal duty to his five adult children, he had a moral duty to them as he did to his surviving spouse, but I place the moral duty to his spouse higher. I have to balance the legal and moral claims of the plaintiff and the children.

[101]     I think that in determining what is an adequate, just and equitable order in the circumstances, I have to take into account the size of the estate, which is significant, the fact that the disposition that the testator directed had significant tax consequences and even with subsequent tax planning resulted in substantial tax obligations reducing the net estate for the benefit of the residuary beneficiaries. It would be unrealistic and unjust in making an award to ignore the actual tax consequences, because even if they could be minimized the plaintiff as co-executor participated in the tax planning that did take place and is now irreversible. In my view, it is at this stage of the analysis that the particular tax consequences arising from the testator’s dispositions should be taken into account.

[102]     Initially the plaintiff sought a lump sum, but in her subsequent submissions, suggested a percentage of the residue given uncertainty about the net value of the estate. I agree with that general submission.

[103]     Given the fact that the plaintiff is without sufficient cash flow to meet her ongoing obligations to live in the fashion to which she became accustomed, and that she will need cash reserves to satisfy the Nicoson debt, and considering the now irreversible tax liability paid by the estate and the ongoing liabilities of the estate, the appropriate order is to provide the plaintiff with a share of the residue that is adequate, just and equitable given all the circumstances I have described.

[104]     Accordingly, I vary the will to provide that 25% of the residue of the estate be paid to the plaintiff together with the minority shareholding in Nicoson. The balance of the residue or 75% will be divided equally among the five children.