There are several types of assets that you may acquire during your lifetime but that you cannot gift to anyone in a Will. This may be because there is a contract, law or professional regulation that prevents you from doing so.
For example, I recently had a client who owned a condominium unit that was part of a retirement cooperative. Her desire was to gift the unit to her son on her death. She could not do so, however, since the cooperative required that all unit owners must be senior citizens.
As another example, shares of private corporations often have a limitation on transfer. This means that they may only be transferred to a specific person or persons according to the shareholder agreement, articles of incorporation and/or share attributes.
In Frye v. Frye Estate, 2008 ONCA 606 (CanLII), five siblings were given equal shares of their father’s company upon his death. One son decided to sell his shares back to the company, such that each of the other siblings now had 25% of the shares. One of these siblings died and left his portion of the shares to his sister, resulting in her having 50% of the company shares. She also held another sibling’s shares as a trustee, since he was disabled. This arguably left the sister with a 75% controlling interest in the company, and the remaining sibling with only 25%. This remaining sibling sued, contesting the validity of the provision in the deceased sibling’s will gifting his shares in the family business to his sister. The basis of his action included the fact that the letters patent under which the company was incorporated in 1968 contains the following provision:
The right to transfer shares of the Company shall be restricted in that no share shall be transferred without the express sanction of the board of directors, to be signified by a resolution passed by the board of directors…
Furthermore, the shareholder agreement provided that the transfer of shares shall require the approval of at least three of the four siblings who were mentally capable.
The case eventually went to the Ontario Court of Appeal. The Court found that the deceased’s estate trustees are bound by the shareholders’ agreement and cannot distribute the shares out of the estate to the sister without complying with the requirements of the shareholders’ agreement and the letters patent. The Court further concluded that the estate trustees’ inability to transfer the shares to the sister immediately does not render the bequest void. However, the estate trustees’ present inability to obtain consent to transfer the shares to the sister not only delayed the carrying out of the deceased’s will instructions but could eventually prevent them from being followed altogether.
What can we learn from this? When it’s all said and done, you simply may not have a say in how, when and to whom some of your assets are transferred. Thus, the nature of your possessions as well as the rights and obligations that are attached to them should be thoroughly explored, including careful review of any fine print in documents relevant to them. What you uncover, in this regard, may eventually influence your decision as to whether to acquire a certain asset. Other assets which may have restrictions on transfer or factors which have this effect include:
- Jointly held assets which pass to a surviving joint owner;
- Partnership interests;
- Franchises;
- Rules of professional or business associations; or
- Property subject to a lien or charge
This list is not exhaustive. If you would like to discuss the best way to transfer certain assets you own, whether you can gift them at all, or other estate planning concerns, please contact Andrea Kelly.
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Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.