The testator left behind an estate worth over $2 million and his will detailed it be divided into two shares, one to his son absolutely and the income of the other to his wife for life, then to be divided among her son’s living children upon her death. The wife brought an application to vary the will as she felt the will failed to adequately address the legal obligations to her. The couple had been married for 53 years and their finances had been intimately entwined. The Court of Appeal overturned the Trial Judge’s decision and ordered variation of the will.
The testator and his wife married in 1945 after both had lost spouse and each had been left with one son. The couple were married for some 54 years and their finances were so entwined that the claimant did not have a bank account until less than a year before her death.
During his life, the testator and his son built up a construction company and in 1988 he executed a will under which equal shares of his estate were to pass to his wife and his son. Just before his death, the testator executed a new will with the detail that his son would inherit one half absolutely, and his wife would receive the income of the other half for her life, which was then to be divided among her son’s children upon her death.
At the trial level, the wife’s action for variation of the will was dismissed. The judge found the testator had reasonable grounds to provide for his wife in the way described in the will. The testator had concerns about his wife’s ability to manage money and management of her future care. As the testator had always been the one to handle the family finances, it appeared he doubted her ability to handle large amounts of money. Subsequently, the judge decided it was reasonable for the testator to set up the trust so that his wife would not be burdened by handling large amounts of money when she had little or no experience.
The wife appealed.
The appeal was ALLOWED.
The Court of Appeal found the Trial Judge did not give the proper weight to the legal and moral obligations owed by the testator to his wife. The Court looked to the Family Relations Act and the division of assets if the wife had applied for separation immediately before the testator’s death. The Court observed she would have had a strong claim to at least half of the estate on the basis that the testator’s legal obligation was to leave her with at least that much. The court also noted the wife’s competence was not challenged at trial and there seemed to be no foundation to conclude that she could not learn to manage funds, even if they were large. Therefore, a life estate in half of the estate was insufficient and did not make adequate, just and equitable provision for her. The testator failed to meet his legal obligations. The wife was entitled to half of the estate paid outright to her.
Additionally, the court ordered that the wife be entitled to provide for her issue (son) and their offspring from her life’s labours as she sees fit, not as the testator saw fit. The couple had raised her son, who was only 2 years old when the couple were married, and was very much part of the family. It may have been the case the testator owed a moral obligation to the son as a potential beneficiary, although he did not have standing to vary the will (step-son).
47 The case at bar does not engage the many conflicting interests that are sometimes present in wills variation cases, for example, cases of short term marriages, dependent adult children or multiple families. Nor is it a case in which the parties, at one time, concurred on the disposition of the estate set out in the will which is subsequently challenged. And it is not a case in which both parties held substantial assets in their own names, or conducted their financial affairs, in some measure, independent of the other.
48 On the other hand, Mr. and Mrs. Erlichman were married for a goodly time, 53 years. At the time of Mr. Erlichman's death, Mrs. Erlichman was 77 years old with, it can be inferred, at least several years of remaining life expectancy. Mr. and Mrs. Erlichman rose by their combined hard work and thrift from near penury to financial comfort such that their amassed wealth at the time of Mr. Erlichman's death, held in his name, was near $2 million. (With the exception of $10,000 held in the appellant's name for convenience in the event of his death, no assets of value were owned by Mrs. Erlichman) At various times in Mr. Erlichman's business life, assets were held temporarily in Mrs. Erlichman's name for asset protection from potential creditors. In the 1988 will that Mrs. Erlichman thought would regulate the estate upon Mr. Erlichman's death, Mr. Erlichman provided that one-half of the estate would pass to his only natural child Harry Erlichman, and one-half of the estate would pass to Mrs. Erlichman; at the same time her will, to his knowledge, left her estate to her only natural child, Sydney Erlichman. One may conclude that at least in 1988 Mrs. Erlichman was viewed as capable of managing a significant sum of money. And at the time of his death Mrs. Erlichman was the only person to whom Mr. Erlichman owed a legal obligation.
49 There can be no doubt that in these circumstances, Mrs. Erlichman would have been entitled to one-half of their joint assets had she applied for a division of assets under the Family Relations Act immediately prior to Mr. Erlichman's death. This undisputable proposition, in my view, gives Mrs. Erlichman a strong claim to at least one-half of the estate on the basis that the content of Mr. Erlichman's legal obligation to her, in these circumstances, was to leave Mrs. Erlichman at least that much. In my view, a life interest in one-half of the estate does not adequately meet this legal obligation. Nor, in my respectful view, does the disposition proposed by my colleague. In circumstances in which fully one-half of the estate is allotted to Mr. Erlichman's natural child (the disposition and moral correctness of which is not challenged by Mrs. Erlichman), as is the case here, the only way in which the testator's legal obligation to Mrs. Erlichman can be met, in my view, is to provide that Mrs. Erlichman receive the balance of the estate outright.
50 I am further of the view that the independence of spirit contemplated in the discussion of the moral obligation in Tataryn, in these circumstances, supports this disposition.
51 In reaching my conclusion as to a fit disposition, I have considered Mrs. Erlichman's entitlement to provide for her issue and their offspring from her life's labours as she sees fit, not as the testator saw fit. In this, the case differs substantially from Crerar, in which all children in the family unit were children of the testator and surviving spouse and shared equally under the Court's decision.
52 I have considered the reason found by the trial judge for the creation of the trust, that Mrs. Erlichman lacked capacity to manage such a large fund. However, I observe that Mrs. Erlichman's general competence was not challenged at trial. In her evidence she described her conservative plan for management of the funds consistent with Mr. Erlichman's practice, and she has been paying bills, banking and hiring persons to prepare tax returns since Mr. Erlichman's death. There is no basis on the evidence to conclude that she cannot learn to manage these funds, as Mr. Erlichman was required to do when he sold the properties for the funds now in issue.
53 It occurs to me that the independence sought by Mrs. Erlichman through this appeal may provide her the right to spend some of the funds unwisely. While that has not been her history, while the trial record does not support this concern and while it is to be hoped this will not occur, it is perhaps the mark of independence that the risk should be there. I further observe that the beneficiaries of the trust alive today, her grandchildren, have supported Mrs. Erlichman in her application.
54 For these reasons I would allow the appeal and vary the will to provide that one-half of the residue of the estate shall be paid to the appellant. This requires an amendment to the will to delete paragraph (3)(d)(ii) and substitute therefore:
· pay or transfer to my wife Rose Erlichman one such equal portion for her own use absolutely.