Basket Clauses are OK again: Milne Estate (Div.Ct.)

Good news.  As the reader will recall, the decision in Milne Estate threw the Estate bar of Ontario in confusion over the issue of whether “basket clause” multiple wills were invalid.  The Divisional Court (Milne Estate (re) [Div.Ct.]) has now restored the law as it was before the first decision: “basket” (or “allocation”) clause wills are once again perfectly acceptable estate planning tools in Ontario, and now — for the first time in the 20+ years of their use — have the seal of approval from an appellate court.

I will summarize the holdings of the Divisional Court (any citations omitted):

·       Because a testator often executes their Last Will and Testament several years in advance of death, it is often not practical to provide a definitive list of assets which will require or do not require probate.  Basket (or “allocation” clauses solve this problem by providing estate trustees with the power to determine whether a particular asset requires probate. [¶ 22]

·       This is a discretionary power, but said power can’t be exercised arbitrarily, but must be done in accordance with the standards applicable to a fiduciary. [¶ 24]

·       The decision of Dunphy J in the lower court that a will is a trust and requires “the three certainties” was incorrect and an error in law.  The decision of Penny J in Panda Estate was correct.  A will may contain a trust, but this is not a requirement for a valid will. [¶ 27-28, 33, 35]

·       The definition of a “will” in s. 1(1) of the Succession Law Reform Act [“SLRA”] does not state that a will is a trust. [¶ 36]  While an executor or administrator is called a trustee by the SLRA, that is merely a relic of the development of modern estate law starting in the 1700s which the law developed at the same time and in the same courts. [¶ 41]

·       Even if SLRA s.(1) creates a trust, the trust is created by statute not by the will, and thus is not subject to the “three certainties.”  [¶ 43-44]

·       Even if a will IS a trust and the three certainties must be satisfied, the subject matter of the Primary Wills IS certain because there is an objective basis to ascertain it, namely, whether a grant of authority by a court of competent jurisdiction is required for transfer or realization of the property; the trustees allocate based on that objective criterion. [¶ 45, 49, 50]

·       Regarding the scope of probate review, Penny J in Panda Estate was correct: “broader questions of interpretation and the validity of powers of appointment or other discretionary decision-making conferred on estate trustees are matters of construction and not necessary to the grant of probate”.  [¶53]  [Note, though, that the Divisional Court said this obiter, i.e., it did not actually decide this with binding effect.  But in saying so it telegraphed what it would decide if the matter came before it.]

Put simply, people who have, or want to use, “basket clause” multiple wills need not worry: the uncertainty has been resolved, everything is fine with them (if drafted correctly) and they are still “good law” in Ontario.  

Further information, citations and links:

Milne Estate (re) [SCJ] [original decision negating basket clause multiple wills]

Milne Estate (re) [Div.Ct.] [Divisional Court decision, setting aside original Milne Estate decision]

“Urgent news re `multiple wills’”  [Camberwell House blog post on original Milne Estate decision]

“Two good articles on the Milne Estate decision”  [Camberwell House blog post linking to two critiques of original Milne Estate decision]

“Provisional good news: a separate judge has rejected Milne Estate”  [Camberwell House blog post on Panda Estate decision, which rejected the original Milne Estate decision]

In Panda Estate (Re), 2018 ONSC 6734 (CanLII)


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