Gifts to a Trust: “Pour-Over Clause”

A fairly recent precedent-setting BC case considers the validity of a gift in a Will to a testamentary trust (Kellogg Estate v. Kellogg, 2013 BCSC 2292).  The deceased’s Will included a “pour-over” clause, or a clause which purports to make a gift to an existing trust.  The Court reported that it was unable to find any BC case law dealing with a pour-over clause, although English, Canadian and American cases were cited.

The gift was made to a trust which was in existence at the time the Will was made, but the gift contemplated future amendments to the trust.

One problem identified by the Court with pour-over clauses is that if the trust is amended following the date of the Will, the amendment will usually fail to comply with the formalities set out in the Wills Act.  In this case, the trust was so amended.

The BC Court held that the fact that the gift was made to a trust and referred to future amendments of that trust, and the fact that the trust was actually amended, was determinative in that the gift could not “pour over”.  To allow this would have the effect of permitting the will-maker to have essentially amended his Will without complying with the formalities of the Wills Act.

In the alternative, the Court was asked to consider a clause in the Will stipulating that if the distribution to the trust was found to be invalid, then the Executor was to distribute the gift on terms that mirrored the trust immediately prior to its invalidity with such trust terms having been incorporated by reference directly into the Will.  Given the court’s stated reluctance to come to a conclusion which would cause an intestacy, it held that the property was to be held on a testamentary trust on the same terms as set out in the trust instrument as it existed at the time the Will was signed, i.e., ignoring the later amendments.

It should be noted that had the deceased passed away after March 31, 2014, this case would have been decided under the Wills, Estates and Succession Act and the Court’s analysis regarding the validity of the “pour-over” clause would have been different.

If you have questions about estate planning or estate litigation, please feel free to contact one of the lawyers in our Wealth Preservation + Estate Litigation Practice Group.