The decision of Alger v. Crumb, 2023 ONCA 209 (Alger), by the Ontario Court of Appeal addressed the issue of whether a general revocation clause in a will revokes designated beneficiaries
A revocation clause is a clause in the will which expressly states that the will revokes any prior wills. It can be a simple one-line clause, such as, “I revoke all wills and codicils previously made by me.” It is not required for a revocation clause to be included in a will; however, it is best practice to include this provision so there is no confusion if a prior will is still in force and effect.
A designation is a specific clause by which the testator/policy holder names someone to receive money, property, investments, or any other specific “benefit.” There are certain assets whereby a named beneficiary can be nominated to receive the funds upon death of a person. Some examples of such instruments are life insurance plans, RRSPs/RRIFs and TFSA. The testator/ instrument holder can either name a beneficiary on the policy itself (in which case this is recommended and best practice to pass outside the estate and avoid probate tax). However, the testator/instrument holder may also name the beneficiary in their will.
In Ontario, designations are governed by section 51 and 52 of the Succession Law Reform Act, R.S.O. 1990, c S.26 (SLRA). Under s. 51(1), a participant can designate a beneficiary of a benefit payable under a plan on the participant’s death through two mechanisms: (a) a signed instrument, or (b) by will.
A will is a legal document that is used to transfer holdings in an estate to other people or organizations after the death of the person who makes the will (the testator). An instrument is a testamentary document through which a specific plan/asset is designated to the nominees/beneficiaries specified in the instrument. These instruments can be life insurance plans, RRSPs/RRIFs and TFSA plans.
The Ontario Court of Appeal in the present case has clarified that the designations of beneficiaries by instrument(s) of the RRIF and TFSA plans are testamentary dispositions and therefore are included within the meaning of that term.
The decision of Alger is instrumental in interpreting the provisions of the SLRA that deal with designation and revocation by will and by instrument.
Section 51(1) of the SLRA states the following:
A participant may designate a person to receive a benefit payable under a plan on the participant’s death.
Section 51(2) of the SLRA prescribes the following:
A designation in a will is effective only if it relates expressly to a plan, either generally or specifically.
Section 52(1) of the SLRA stipulates the following:
A revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically.
Theresa Lorraine Crumb (the testator) had four children, the appellants, and the respondents. By her will dated May 29, 2019, (the will), she named the appellants as her estate trustees.
The will leaves a $20,000 bequest to each of the respondents, some small bequests and the residue to only two of her children who are the appellants.
At her death, the testator had RRIF and TFSA plans at Scotiabank. By instrument(s) which were executed before the will, the testator designated all four of her children as equal beneficiaries of the plans.
The will contained a general revocation clause in paragraph one. In the affidavit, the appellants stated that the respondents were estranged from their mother during her final years and that was why she made her will to favour the appellants and that the general revocation clause was effective to revoke the designations.
The application judge found that because the general revocation clause did not relate expressly to the testator’s existing designations by instrument(s) of her RRIF and TFSA plans, it was not effective to revoke those designations and the designations remained in effect.
Decision of application judge
The application judge made the following findings:
- The beneficiary designations by instrument(s) of the RRIF and TFSA plans are testamentary dispositions at law.
- The general revocation clause in the will does not relate expressly to the designations. Section 52(1) of the SLRA states that the revocation clause is only related to the will if the revocation clause expressly states the revocation.
- The Superior Court of Justice decision in Ashton Estate South Muskoka Memorial Hospital Foundation, 2008 O.J. No. 1805, which held that a general revocation did revoke the designation is “plainly wrong” in law and the application judge was not obliged to follow the decision.
- The general revocation clause in the testator’s will did not revoke her beneficiary
This is the first of a two-part series.