A Rule to Be Aware of When Drafting a Will
In Goss Estate (Re), 2020 ABQB 121 a testator prepared his own will and attempted to create trust that would not be gifted to anyone but instead exist in perpetuity.
The Court produced the key paragraph at paragraph 7 as follows:
Although the interest earned on the residue of my estate so invested as set out in 5.b) above may be divided and shared, the capital assets so invested on which the interest is earned must not be divided and shared, but is to be retained in trust for future generations of children and grandchildren.
Due to the attempt to create a perpetual trust, the Court considered the application of the rule against perpetuities.
The Honourable Justice Robert A. Graesser summarized the applicable legislation at paragraphs 15 and 16 as follows:
The Rule Against Perpetuities is described in Feeney’s, Canadian Law of Wills 4th Ed, (Toronto: LexisNexis, loose-leaf) at paragraph 14.4:
Any interest created by a will is valid if:
a) It vests at that date the will takes effect; or
b) It will vest, if at all, within 21 years of the death of the will-maker; or
c) It will vest, if at all, within 21 years of some life in being at the time designated for the creation of the interest.
The Perpetuities Act says in paragraph 4:
4(1) Every contingent interest in real or personal property that is capable of vesting within or beyond the perpetuity period is presumptively valid until actual events establish
(a) that the interest is incapable of vesting within the perpetuity period, in which case the interest, unless validated by the application of section 6, 7 or 8, shall be treated as void or declared to be void, or
(b) that the interest is incapable of vesting beyond the perpetuity period, in which case the interest shall be treated as valid or declared to be valid.
Many law students dislike learning about the confusing rule against perpetuities in first year property law.
In essence the rule renders a trust as void if, as described by the Court at paragraph 20, “the perpetuity period lasts for the duration of the lives of persons in being at the time of the instrument creating the interest take effect, plus 21 years after the last life.”
Justice Graesser found the trust violated the rule against perpetuities. In result, the trust was declared void and devised by the instate provisions within Part 3 of the Wills and Successions Act.
This case demonstrates what will occur if a trust is found to violate the rule against perpetuities. If you have questions regarding your will, contact one of the estate lawyers at Kantor LLP.