Case Studies
Herbach v. Herbach Estate
Can you transfer assets to certain children before your death, to ensure that your other children do not receive these assets through a wills variation claim?
In the recent case, a will was challenged on the basis that it disproportionately favoured certain children of the deceased. Some children were gifted assets immediately prior to the deceased’s death, and others received very little through the will, due to the depleted estate.
The will-maker wished to transfer her assets before her death to avoid having them go through probate and thus being subject to the rules in the Wills, Estates and Succession Act concerning the moral obligation to provide for children.
The will-maker hired an estate planning lawyer to transfer her property into joint tenancy with certain children prior to her death and to help her draft a deed outlining her intentions in respect of her estate.
Joint tenancy provides that when one joint tenant dies, his or her interest in the property passes automatically to the surviving joint tenant(s). This means that interest does not form part of the deceased person’s estate.
The result of this estate planning technique was that the assets remaining in the will-maker’s estate, to be divided among all of her children, were diminished.
The court found that the pre-death gifting was lawfully executed and therefore confirmed that this property did not form part of the deceased’s estate.
Conclusions
In this case, the court noted that pre-death gifts could go either way: they may be considered valid transfers, or they may be invalidated thus returning the assets to the estate, and in turn, the will.
There are situations where rights to an asset may be transferred to an adult child without the intention of a gift. For example, an adult child may be added to a bank account jointly to help an elderly parent manage their finances.
In this case, the lawyer made the will-makers intention clear: she intended this transfer to be a gift. If the will-maker had not diligently planned her estate prior to her death, her assets might have been redistributed by the court to the excluded children.
This case illustrates why it is important to meet with an estate planning lawyer to ensure your final wishes will be carried out by your will and by the court.