Estate law is changing, and many well-heeled clients may be surprised to learn they don’t have the last word when it comes to decisions about their heirs.

The changes are mostly being driven by judges, and this emerging trend in case law is creating greater rights for family members, such as adult children, who’ve been cut out of a will. Financial advisors who are up to date on the changes have a better chance of informing clients about their options — and avoiding successful challenges to the wills of affluent clients.

In particular, advisors should make clients aware of the need to deal with their estates in a manner that the courts view as fair and equitable, warns Susan Woodley, an estate, trust and guardianship litigator based in Bowmanville, Ont. Otherwise, named heirs may find themselves facing litigation that is upsetting, expensive and results in a court-imposed redistribution of the deceased’s assets.

Woodley has done extensive research on recent case law in which courts have upheld the moral claims of independent adult beneficiaries or would-be beneficiaries seeking a larger share of their family’s wealth. In such cases, a lot of expensive preplanning has gone to waste.

“People spent a lot of money surrounding themselves with very sophisticated financial investment and tax advisors trying to create a perfect estate plan and possibly choosing to cut out individual children,” says estate lawyer Suzana Popovic-Montag, a partner with Hull & Hull LLP in Toronto. “But the case law is saying, ‘You can’t do that.’ The trend is that you can’t cut kids out of your estate plan unless you have a really good reason.”

Second marriages are on the rise, especially among the affluent, and are often a source of the conflicts that result in these cases. For instance, a deceased person who had remarried may tend to favour the second family and ignore the rights of the first family. This can be especially problematic if most of the deceased’s assets were accumulated during the first marriage, a not uncommon situation. The matter is further complicated if the first spouse has died, leaving all of his or her assets to the surviving spouse, with the clear expectation that his or her children will receive a fair portion of the estate when the surviving spouse dies.

These kinds of conflicts also arise in blended families, notes Trevor Todd, an estate litigator in Vancouver. In these types of situations, he says, “There may be differing perceptions of any obligation to provide an inheritance for younger children, as opposed to older, more established children.”

Until recently, the courts have relied on provincial laws when it comes to the claims of family members seeking a greater share of the estate. In Ontario, the Succession Law Reform Act allows judges to override the terms of a will if it has failed to make adequate provision for the proper support of dependents to whom the deceased was providing support, or to whom there was a legal obligation to provide support, immediately before his or her death. Other provinces have similar legislation. British Columbia’s law goes further: under its Wills Variation Act, financially independent adult children are also permitted to make a claim.

But over the past decade, courts have taken the initiative, expanding the groups that can successfully challenge a will. In many cases, these are situations in which individuals who would normally be expected to inherit are ignored — typically, family members. “What the courts are doing is recognizing the needs and expectations of society,” Woodley says.

However, courts remain sensitive to the wishes of the deceased and will often leave the substance of a will intact while making provisions for disinherited family members. A B.C. court, for instance, recently varied the will of a man who had remarried in his 70s and established a new family. The court in Waldman v. Blumes upheld most of his will — which had left the bulk of his estate to the second wife and the two dependent children who were still in university — but also acknowledged that there was a moral obligation to the two children from the first marriage, which ended when their mother died.

The children from the first marriage were awarded just $75,000 each out of a $1.8-million estate, with the court noting that one daughter was a married teacher nearing retirement and the other had failed to show significant financial need. “We made an argument for testamentary autonomy that was upheld in this case, based on the facts,” says Amy Mortimore, a partner with Clark Wilson LLP in Vancouver, who represented the widow.

@page_break@John O’Sullivan, a partner with Weir Foulds LLP in Toronto, says advisors should urge clients to write memos documenting their reasons for any potentially contentious decisions. For example, someone may want to explain in a memo that he is leaving everything to one child because he has provided for the other child during his lifetime. “That’s important,” he says, “because the courts pay attention to that kind of clear expression of intent.”

The roots of the current trend reach back to 1994, when the Supreme Court of Canada ruled that a shoemaker was not entitled to disinherit his wife of 43 years in a malicious attempt to prevent her from leaving money to one of his sons, whom he happened to dislike. The moral claims of both the wife and the disliked son were upheld.

Since then, Ontario cases dating from 2004 and 2006 have specifically varied wills to take into account the moral claims of independent family members, as well as those with specific needs. In one case, the Ontario Court of Appeal stated that the test should be what a “judicious” person would do in the circumstances.

It’s fair to say that many conflicts over estates have arisen since these cases were decided, and that they have been settled without a trial based on these principles. Woodley notes, however, that there is still much uncertainty in the area because no recent cases have been heard by the SCC.

So, what should advisors tell their clients in the light of all this?

Popovic-Montag says it’s important to tell clients that their estate plans are not bulletproof: “We have a system in which there’s an opportunity for the courts to ignore what you ultimately intended and provide for people whom you may not have ever wanted to have a part of your estate.”

Woodley says advisors should make it clear to clients that they need to deal with their estate in a just and equitable manner: “A will should not be based on the emotions of the day, but should represent a client’s lifetime.” IE