Many people assume that the creation of legal obligations must be in writing to be legally enforceable, which is not the case. The potential to create legally enforceable obligations via verbal means has long existed. In the wills and trusts arena, people continue to choose, arguably unwisely, not to put their death wishes and intentions regarding their estate in writing. The range of reasons for not doing so is wide. For example, for some, it is culturally taboo to speak of death, including because it is believed that creating a valid will or testamentary document such as a written trust indenture will hasten the moment of death. Others believe their family members will work things out amongst themselves, acting fairly and that in essence they will “do the right thing”. Still others believe the time and/or monetary cost of preparing written estate planning documents are too high.
Unfortunately and ironically, the truly high cost of not putting testamentary wishes in writing was once again demonstrated in the recently decided case Sawdon Estate v. Sawdon, 2014 ONCA 101 (CanLII). In the case, Arthur Sawdon transferred several bank accounts (the “Bank Accounts”) into joint names with right of survivorship to himself and two of his five children, Wayne Sawdon and Stephen Sawdon. Insodoing, he instructed them and they accepted the responsibility to divide the total balance of the Bank Accounts equally between his five children (the “Children”) on his death. At the time of his death, the Bank Accounts were worth $1,076,000 and there was no mention of them in his will. However, the will did provide that the Watch Tower Bible and Tract Society of Canada (“Watch Tower”) would receive the share of any child who died without issue (that is, lineal descendants), as well as the residue of his estate (the “Estate”).
The main issue of the case surrounded joint accounts and rights of survivorship. Specifically, Watch Tower, disputed with the Children, claiming that the bank accounts formed part of the Estate by virtue of legal principles outlined in the Supreme Court of Canada decision Pecore v. Pecore, 2007 SCC 17 (CanLII), 2007 SCC 17,  1 S.C.R. 795.
The Court of Appeal in Sawdon also briefly discussed the creation of secret trusts, which appears to have happened when the Bank Accounts were transferred into joint title. Secret trusts were discussed in our post “Can You Be Trusted To Keep A Secret?”
In reaching an interesting conclusion, the court held that when Arthur transferred the Bank Accounts into joint names with Wayne and Stephen, he created a trust. Specifically, from the time that the Bank Accounts were transferred into joint ownership, Wayne and Arthur held the legal title to the Bank Accounts and also the right of survivorship in trust for the Children in equal shares. Another way of stating this is that on Arthur’s death, the Children owned the right of survivorship. The Court of Appeal, therefore, upheld the trial court’s decision that on Arthur’s death, the Children became entitled to the monies in the Bank Accounts in equal shares, rather than them falling into the Estate as Watch Tower had argued.
Obviously, Arthur trusted his sons to carry out his wishes and therefore concluded that nothing further needed to be done to accomplish his intentions. Unfortunately, as can be seen, the litigation that ensued could have been prevented and/or more easily resolved if the arrangement were in writing.
For assistance in ensuring that your wishes and intentions regarding your estate planning are clearly stated, enforceable and accepted by all relevant parties, especially your intended beneficiaries, please contact Andrea Kelly.
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.