/ Estates

It's official: wills are not trusts

In Milne Estate (Re), 2019 ONSC 579, the Divisional Court resolved the recent confusion caused by the conflicting Milne and Panda decisions about the validity of certain wills containing "basket clauses".

Conflicting decisions

In the original Divisional Court decision in Milne, Dunphy J. held that certain primary wills were invalid because of the use of a basket clause which gave the estate trustees discretion over which assets were covered by the primary vs secondary wills.

A will is a form of trust. In order to be valid, a will must create a valid trust and must satisfy the formal requirements of the Succession Law Reform Act, R.S.O. 1990, c. S.26. There is no issue here regarding compliance with the formal requirements of the SLRA.

As with any trust, a valid will must satisfy the “three certainties”: certainty of intent to create the trust, certainty as to the subject-matter or property committed to the trust and certainty as to the objects of the trust or the purposes to which the property is to be applied.

Milne Estate (Re), 2018 ONSC 4174, at paras 14-15

Since practitioners have long relied on basket clauses as legitimate estate planning tools, the initial decision meant that thousands of wills could be invalid.

A conflicting decision was penned by Penny J. in Panda. Penny J. rejected Milne and the notion that a will is a form of trust:

I must respectfully part company with Dunphy J. over his assertion that a will is a form of trust and that, in order for a will to be valid, it must create a valid trust. No authority was cited for this proposition. I believe it is incorrect as a matter of law.

Not one of the authoritative texts on wills asserts that a will is a trust. Not one of these texts, when setting out the criteria for a valid will, cites the necessity to satisfy the requirements for the creation of a valid trust; that is, the “three certainties.” Rather, to establish validity for purposes of probate, a will must conform to certain formal requirements (noted above), provide for distribution or administration of property and take effect upon death. Nor am I aware of any judicial precedent which concludes that a will is invalid because it, being a trust, failed to satisfy the three certainties.

A will is a unique instrument. A will shares some of the attributes of a contract and some of the attributes of a trust but it is neither; a will is its own, unique creature of the law.

Panda estate (Re), 2018 ONSC 6734, at paras 19-21.

The appeal

The long-awaited appeal sided with the Panda decision that a will is not a form of trust. The appeal went on to state that even if a will was a form of trust, it would satisfy the three certainties.