Stopping The Flow ' A Look At Pour-Over Trusts In Canada

• Published date: 09 December 2022
• Subject Matter: Family and Matrimonial, Wills/ Intestacy/ Estate Planning
• Law Firm: McLennan Ross LLP
• Author: Ms Michelle Fong and Graem White

What is a Pour-Over Trust

A pour-over trust in a Will occurs when a testator creates a trust during their lifetime and then, in their Will, includes a clause that names that trust as a beneficiary. The legal issue is created when this trust is amendable and revocable. For example, let's say a testator creates a trust (ex. it names A and B as beneficiaries) and then signs a Will naming the trust as the beneficiary of their Estate (effectively making A and B beneficiaries of their Estate). Later, a testator amends the beneficiaries of that trust (so A and B are no longer beneficiaries) and names new beneficiaries (C and D). This, in turn, means the Estate beneficiaries through the Will are now, effectively, different (they are now C and D). In several Canadian jurisdictions, you can only amend a Will through certain formalities defined under the legislation. In Alberta, unless a Will is holographic (i.e., handwritten by the Testator), two witnesses must be present when there is an amendment.¹ Therefore, the issue with using a pour-over trust in a Will is that it may effectively allow a person to alter their Will by altering their trust without complying with the required formalities, like making that alteration in the presence of witnesses.

Currently, the Alberta Courts have not considered this issue yet. However, the Courts in British Columbia ('BC'), Nova Scotia, and Ontario, have all considered the validity of pour-over Trusts and their decisions are likely to be influential in Alberta.

Pour-Over Trusts in Canada

Quinn Estate v Rydland: 'pour-over' clauses in a Will are invalid in BC.²

In Quinn Estate, the clause at issue granted the residue of Mr. Quinn's Estate to an inter vivos family Trust (the 'Trust'). The Trust was amendable and revocable, and it was settled before the execution of the Will. However, it was subsequently amended three years after its creation without following the formalities set out in the BC Wills Act.³

The first issue the court identified was that a pour-over clause allowed Mr. Quinn to make 'a testamentary disposition in the future without complying with the formalities' of the BC legislation.⁴ The second issue was that there could be amendments without knowing with certainty that it was 'the actual disposition purported to be made by Mr. Quinn' since it was not governed by terms in the Will itself.⁵

The parties seeking to uphold the pour-over clause made appeals to the following: (1) the doctrine of incorporation by reference...