Berry Estate (Re), 2016 ABQB 58

Court of Queen ’ s Bench of Alberta Citation: Berry Estate (Re), 2016 ABQB 58 Date: 20160126 Docket: ES03 133313 Registry: Edmonton Court File Number ES03 133313 Court Court of Queen’s Bench of Alberta (Surrogate Matter) Judicial Centre Edmonton Estate Name A.B. Applicant C.D. Respondents (Personal Representatives) E.F. G.H. Restriction on Publication Pursuant to the provisions of

section 126.2(1) of the Child, Youth and Family Enhancement Act , R.S.A. 2000, c. C-12, the names of the parties have been anonymized to prevent the identification of a child who has received intervention services . _______________________________________________________ Endorsement of the Honourable Madam Justice J.B. Veit

_______________________________________________________ [ 1 ] In morning chambers, invoking the provisions of s. 42 of the Trustee Act , the adult life tenant beneficiary of a will asks the court to terminate the trust provisions relating to her share in her late mother’s will. [ 2 ] The application is allowed. [ 3 ] The publication ban, which was issued in 2013, was presumably authorized, at least in part, because of the reference to the remainderwoman’s status as a ward of the state. [ 4 ] The will appoints the applicant as executrix of her late mother’s will and as trustee of the trusts created under the will.

After making specific bequests to her children and grandchildren, the testatrix’s will goes on to state that the residue of her estate shall be dealt with as follows: I direct the residue of my estate be divided into three (3) equal shares and to pay or transfer one (1) such share to each of my children, subject to the following trusts: . . . To invest and keep invested the share of my daughter, C.D., subject to the following trusts: (

a) Income Distribution My daughter, C.D.., is to receive the income from her share, subject to encroachments , on a yearly basis until her death, at which time the remaining capital of her share, and any income earned thereon, shall be distributed as follows: 1.

To divide the remaining capital of her share, and any income earned thereon into equal shares and to pay or transfer one (1) such share to each of her children (my grandchildren), subject to trusts established in Paragraph 1 below. . . . [Emphasis added] [ 5 ] The shares of the residue to be given to each of the testatrix’s other two adult children were also subject to trusts pursuant to which those adult children were also to receive the income from their shares, “subject to encroachments”, in each of their cases until the happening of specified events.

Each of those trusts has been vacated or terminated for public policy reasons; in the result, the applicant’s siblings have each received the capital of the trusts created for them by the testatrix. [ 6 ] In 2013, the applicant was replaced as the personal representatives of her late mother’s estate by her two siblings; this change also makes the applicant’s siblings the trustees of the life trust which has been set up for the applicant.

This change was made at a time when the applicant was suffering florid mental health difficulties. [ 7 ] There is now, and has been over the past years, considerable friction between the applicant and her two siblings. As personal representatives, the siblings state that they do not want to take an adversarial position, but do outline their concerns about granting the application. [ 8 ] The amount in the trust which is held for the applicant is approximately $300,000.00.

In 2015, the applicant received approximately $2,300.00 as the income from the trust, after expenses of approximately $3,000.00 were paid out from the trust. There might be small increases in the income of the trust in future years; the expenses of the trust are expected to remain approximately the same in the foreseeable future.

Since the siblings have been trustees, no encroachments were made on the capital for the benefit of their sister and no encroachments were requested by the applicant. [ 9 ] The applicant is employed and earns approximately $2,000.00 in net monthly income; she lives within her income, but describes her situation as living “from month to month”.

She would use any distribution from the trust to pay off her secured and unsecured lines of credit, to make improvements to the home in which she resides, and to purchase a vehicle. [ 10 ] The applicant, who is 52 years old, and divorced, only has the one child, the remainderwoman on this application. The applicant has had significant mental health difficulties, which difficulties would have been known to her mother.

By letter dated in mid- August 2015, the applicant’s psychiatrist has provided the following information to the court: The above named is a patient under my care at the . . .Department of Psychiatry since April of 2005. Originally when I met . . . her appointments were much more infrequent but certainly in the last two years her appointments have been every two weeks and she is very diligent in coming for them. I understand that there is a question as to her ability to manage money in a trust that has been rightfully hers. I have no question as to . . .’s mental stability.

She has worked diligently for over a year and a half, remodeled her house and lived very successfully since her daughter was taken out of her home. . . . has worked extremely hard to recover herself, being completely compliant with medications and with therapy. It has certainly paid off as there have been no signs of depression whatsoever. . . . has also been very appropriate in my estimation of the money that she earns and how she spends it.

It is understandable that at her stage in life she would need the trust money particularly because of paying of her mortgage. [ 11 ] The applicant’s daughter, a 16 year old minor who apparently voluntarily left her mother’s residence and became a ward of the state, is represented on this application by the Public Trustee. There is no information on this application about whether the state has requested child support from each of the child’s mother, the applicant herein, and the child’s father.

In addition to being the remainderwoman in relation to the trust set up for her mother/the applicant, that grandchild of the testatrix is also the beneficiary of

another testamentary trust into which the testatrix deposited the house and property in which the testatrix lived and, in addition,$10,000.00 earmarked for the maintenance of that house and property. That house is assumed to be worth approximately$300,000.00.According to the terms of the will, the testatrix’s grandchild, the applicant’s daughter, is to receive the trust when sheattains the age of 30.

On this application, nothing is known about the 16 year old’s father, his financial circumstances, and the likelihoodthat he will be making provision for his daughter in his will. [12] In addition to the applicant’s daughter, the testatrix had three other grandchildren, each of whom received a testamentarybequest of $10,000.00.

Those grandchildren would also conceivably benefit from the trust created by the testatrix if the applicant’sdaughter did not herself apply to terminate “her” trust once she reaches the age of majority and did not reach the age of 30. [13] Alberta’s Trustee Act includes the following provisions: Variation of trusts 42(1) In this section, “beneficiary”, “beneficiaries”, “person” or “persons” includes charitable purposes and charitable institutions.

(2) Subject to any trust terms reserving a power to any person or persons to revoke or in any way vary the trust or trusts, a trust arisingbefore or after the commencement of this section, whatever the nature of the property involved and whether arising by will, deed or otherdisposition, shall not be varied or terminated before the expiration of the period of its natural duration as determined by the terms of thetrust, except with the approval of the Court of Queen’s Bench. . . .

(4) The approval of the Court under subsection (2) of a proposed arrangement shall be by means of an order approving (

a) the variation or revocation of the whole or any part of the trust or trusts, (

b) the resettling of any interest under a trust, or (

c) the enlargement of the powers of the trustees to manage or administer any of the property subject to the trusts.

(5) In approving any proposed arrangement, the Court may consent to the arrangement on behalf of (

a) any person who has, directly or indirectly, an interest, whether vested or contingent, under the trust and who by reason of minorityor other incapacity is incapable of consenting, (

b) any person, whether ascertained or not, who may become entitled directly or indirectly to an interest under the trusts as being, at afuture date or on the happening of a future event, a person of any specified description or a member of any specified class of persons, (

c) any person who after reasonable inquiry cannot be located, or (

d) any person in respect of any interest of the person’s that may arise by reason of any discretionary power given to anyone on thefailure or determination of any existing interest that has not failed or determined.

(6) Before a proposed arrangement is submitted to the Court for approval it must have the consent in writing of all other persons whoare beneficially interested under the trust and who are capable of consenting to it.

(7) The Court shall not approve an arrangement unless it is satisfied that the carrying out of it appears to be for the benefit of eachperson on behalf of whom the Court may consent under subsection (5), and that in all the circumstances at the time of the application tothe Court the arrangement appears otherwise to be of a justifiable character.

(8) When an instrument creates a general power of appointment exercisable by deed, the donee of the power may not appoint to himselfor herself unless the instrument shows an intention that he or she may so appoint.

(9) When a will or other testamentary instrument contains no trust, but the Court is satisfied that, having regard to the circumstances andthe terms of the gift or devise, it would be for the benefit of a minor or other incapacitated beneficiary that the Court approve anarrangement whereby the property or interest taken by that beneficiary under the will or testamentary instrument is held on trusts duringthe period of incapacity, the Court has jurisdiction under this

section to approve that arrangement. [14] On behalf of the remainderwoman, and of one of the other grandchildren who would have an interest if the applicant’sdaughter did not obtain the benefit of the trust, the Public Trustee opposes the application because it is not in the interests of theremainderwoman. [15] There is no doubt that the application is not in the interests of the remainderwoman: there is no guarantee either that theapplicant will have an estate upon her death or that she will make her only child the beneficiary of her estate.

I agree, as well, that atrustee must be even handed as between a life tenant and a remainderwoman.

Nonetheless, even that duty is subject to the terms of thewill. [16] The terms of the will, as expressing the wishes of the testatrix, are indeed the most important factor in the court’s decision.Although there has been some comment in Canadian case law to the effect that the intention of the settlor is not even relevant, much lessmaterial, to the determination of whether a trust should be terminated – see, for example, Russ v British Columbia (Public Trustee)(1994) (BC SC), 89 B.C.L.R. 92d) 35, the weight of the case law appears to remain that the wishes of thetestator/settlor are to be taken into account – see, for example, Montreal Trust Co. v Krisman (1960) (SCC), 24D.L.R. (2d) 220.

[ 17 ] Here, as the applicant emphasizes, she was not only the beneficiary of the trust in question, but she was also the trustee of that trust. The personal representatives note that the will does not explicitly give to the trustee the power to encroach. However, in assessing the wording of the trust provision in its entirety, and, in particular relying on the phrase “remaining capital” in relation to the encroachments, I conclude that the testatrix did indeed intend to give to the applicant the unrestricted right to encroach upon the capital of the trust to make payments to herself.

In this context, I refer to decisions such as Holgate v Sheehan Estate 2015 ONSC 259 for comment where the power of encroachment was limited in some way, for example, as to “proper support and maintenance”; in the situation here, there is no restriction whatever on the power of encroachment. In the same overall context, when the testatrix died in 2010, the applicant’s daughter was living with the applicant. The testatrix would have had no concern about any special needs for her granddaughter; indeed, even as of the date of this application, the granddaughter in question does not appear to have any special needs.

In any event, the granddaughter in question has been well provided for in this will by her grandmother. In the result, in the situation here, the testatrix intended to give to the applicant the right to fully encroach on the capital of the trust for whatever reason the applicant chose. This means, in effect, that, in perfect compliance with the will, the applicant might have left no remainder for her daughter.

Indeed, given the very small returns available to the applicant from the income alone, (the Bank of Canada overnight rate in September 2010 being one percent) it must certainly have been within the testatrix’s assessment that substantial encroachments on capital would be made. [ 18 ] The personal representatives observe that the testatrix obviously preferred the applicant’s daughter to her other grandchildren; indeed, they state that the applicant manipulated their mother to advance the interests of her own daughter.

In any event, as is pertinent to the effect on the granddaughter of terminating the trust, the court observes that, in the remainderwoman portion of the trust, the testatrix did not even specifically mention the granddaughter, or mention solely the granddaughter, even though the daughter who was the trustee under the will was divorced and was of an age where it was unlikely that she would bear other children.

In other words, the provisions of the will specifically creating a life interest in the applicant do not appear to have taken special account of the granddaughter. [ 19 ] As to whether the application is premature, given the fact that no application for encroachment has been made, given the animosity between the applicant and her siblings, it is probable that any such application by her would lead to further litigation. [ 20 ] The personal representatives express some concern about the applicant’s ability to manage money.

Although the applicant’s psychiatrist has obviously misunderstood some aspects of the current situation – it is not correct, for example, for the psychiatrist to assume that the money in the trust is “rightfully” that of her patient – the psychiatrist’s opinion suggests that the applicant would deal with the trust funds normally, i.e. she would presumably make the kind of good and bad decisions which adults typically make in relation to money which is under their control. [ 21 ] In all of these circumstances, the court allows the application and approves the arrangement proposed by the applicant.

That arrangement is of a justifiable character given the provisions of the will itself. [ 22 ] The applicant asks the personal representatives for an accounting of the trust; I expect there will be no difficulty in providing that accounting, but if there is, the parties are at liberty to re-address the court on that issue. [ 23 ] The costs of all of the parties will be paid from the estate. Heard on the 15 th day of September, 2015. Dated at the City of Edmonton, Alberta this 25 th day of January, 2016. J.B. Veit J.C.Q.B.A. Appearances: Helen R. Ward, Duncan & Craig LLP for the Applicant Christopher R. Head

for the Personal representatives Stacy K. Hennings for the Office of the Public Trustee