Estate Litigation: Verbal Instructions Before Death Created Secret Trust

A recent British Columbia case had to consider what happens to an estate that was promised to a family member verbally, without a written will.

What Happened?

The deceased died on April 25, 2013 after the rapid onset of pancreatic cancer, diagnosed only two months earlier. She did not make a will, but gave her common law spouse specific instructions about her estate.

The deceased did not have any children and verbally told her spouse she wanted her assets to be given to her niece. The deceased had also had conversations with other members of the family stating she wanted her estate to go to her niece. She wanted to leave her estate to her niece to help her get on a better financial footing and continue her education.

After her death, because she did not have a will, her estate passed to her common law spouse on an intestacy.

Following the deceased’s death, her spouse created a will wherein he divided the residue of his estate into ten shares, and left three of those shares to the niece, which would be equal to the amount of the deceased’s estate. He claimed that his intention in creating the will was to put the deceased’s wishes into effect after his death.

The deceased’s family claimed that the deceased had said that her estate was to go to her niece when her common law spouse began a new relationship. However, her spouse claimed that the deceased had told him that the niece was only to receive her estate upon the spouse’s death.

The niece alleged that she was the beneficiary of a secret trust created by the deceased and held by the spouse.

Issue

The question was whether a trust was created by the deceased, wherein her common law spouse held her assets solely for the benefit of her niece.

Decision

Because the deceased did not have a will, the court explained that hearsay evidence may be admitted where necessity and reliability are established on a balance of probabilities. It found that the necessity had been established in this case.

After evaluating the testimony of all parties, the court found that, because the deceased had stated to her common law spouse and other family members that she wanted to leave her estate to her niece to help her get on a better financial footing and continue her education, it was more likely that the deceased intended the niece to receive her estate much earlier than on the spouse’s death.

The court then explained what a secret trust is, citing previous case law:

“A secret trust arises where a person gives property to another, communicating to that person an intention that the property be dealt with in a specific way upon the happening of an event, and the donee accepts the obligation. The essential elements are the intention of the donor, a communication of the intention to the donee and acceptance of the obligation by the donee.”

The court then stated that in circumstances where a person dies intestate relying on the fact that her intestate heir has accepted the trust, the law will compel the trustee to carry out the trust.

The court found that the niece had established the elements of a secret trust.

As a result, the court found that the spouse was holding all of the deceased’s estate assets in a trust for the niece.

Further, the court rejected the spouse’s claim that he was not required to transfer the trust assets to the niece until his own death. Instead, it accepted the evidence that the spouse was obligated to transfer the estate once he began a new relationship.

Considering that the spouse had begun a new relationship in 2013, the court found that he was obliged to immediately transfer the trust assets to the niece.

Get Advice

The highly-experienced and strategic Calgary estate lawyers at DBH Law can help you draft or update your will to reflect the needs of your family and your estate, no matter its size or complexity. Our responsive and concise approach to our work makes the process of will and estate planning easy for our clients.

We take pride in the relationships we have built with our clients, and the opportunities we have to represent their legal needs as they grow and evolve. We understand your need to provide for your family and loved ones while also minimizing the taxation and chances of litigation your estate may face. We can be reached by phone at 403.252.9937 or online and look forward to the chance to learn about what is important to you, and how we can help you achieve that.