In Goss Estate (Re), 2020 ABQB 121, the Court of Queen's Bench of Alberta considered whether provisions of a will violated the Rule Against Perpetuities.
George Edward Goss prepared his own will in 1992. The will was properly executed.
Mr. Goss died in November 2019, leaving behind a large estate. His wife pre-deceased him in 2014. Mr. Goss was survived by two adult children, who had five grandchildren between them.
According to Mr. Goss's will, the residue of his estate was to be reinvested in safe, interest-bearings investments (i.e. bonds) with the interest divided equally to his children as it's earned. Paragraph 5(e) of the will stated that while this interest was to be divided equally between his children, the initial capital was to remain invested, in trust for future generations.
Does paragraph 5(e) of Mr. Goss's will violate the Rule Against Perpetuities?
On its face, paragraph 5(e) appears to create a perpetual trust. Mr. Goss's children applied to court to see if this clause violated the rule against perpetuities and was therefore invalid.
The Rule Against Perpetuities
The Rule Against Perpetuities is a longstanding common law rule that limits how long a testator can keep the residue of their estate tied up in particular ways. The idea is that a deceased individual shouldn't be able to dictate how their property is invested for too long after their death.
The rationale for the rule is that "the grasp of the dead hand ... on the living" (Canadian Long Island Petroleums Ltd v Irving Wire Product at para 5) should be limited for the sake of economic efficiency. The dead shouldn't be able to control how capital is invested forever, since the living can likely invest it in more economically efficient ways.
Specifically, The Rule Against Perpetuities invalidates interests created by a will that fail to vest within 21 years after the death of the testator. See PanCanadian Petroleum Ltd v Husky Oil Operations Ltd, (1995), 1994 CanLII 9084 (AB QB).
In Alberta, the Perpetuities Act (RSA 2000, c.P-5) codifies and modifies aspects of this common law rule.
The Act allows for a "wait-and-see" approach, i.e. if it's not immediately clear if an interest will fully vest before or after 21 years from the death of the testator, you can wait and see before determining if the interest is void.
Sections 6-8 of the Act allow courts to fix an offending provision by reducing a specified age, excluding certain class members, or by giving effect to the general intention in a way that complies with the rule.
Application to the Facts
Paragraph 5(e) of Mr. Goss's will clearly violates the Rule Against Perpetuities. It requires the residue of Mr. Goss's estate to be invested in bonds for an indefinite period of time. This provision cannot be saved by sections 6, 7, or 8 of Alberta's Perpetuities Act.
This paragraph of the will is therefore void and the property pertaining to it is intestate. According to Alberta's rules of intestacy (see the Wills and Successions Act), the residue is to be divided equally between Mr. Goss's two children.
The Bottom Line
Good intentions don't always make for good will provisions. You can't use your will to dictate how your capital will be invested for too long after your death. Life - and investment decisions - are for the living.