January 13, 2015

If you take steps to administer an estate pursuant to a will or to otherwise behave as if a will is valid, you may lose the right to later challenge that will.

In Neuberger v. York, a decision of Justice Greer released in November 2014, she considered a motion to dismiss a will challenge that had been brought by one of the co-estate trustees of the estate. She granted the motion, finding that the will challenge was precluded by the doctrines of estoppel by representation and estoppel by convention.

During his lifetime, Chaim Neuberger amassed quite a fortune through his hard work. A few years before his death, he began to take steps to plan for the eventual transfer of his wealth. In 2004, he completed a butterfly transaction which more or less equally divide his holdings, valued at roughly $125 million, into two companies. One of those companies would eventually go to his daughter Edie and her 5 children and the other company would go to his daughter Myra and her 3 children. An estate freeze was then undertaken for tax planning purposes. In 2010, Chaim executed dual wills and a POA for property.

Edie and Myrna were named as estate trustees of the 2010 primary and secondary wills of their father. After acting in her capacity as estate trustee for approximately 14 months, Edie commenced a will challenge application. On first reading the case, it was difficult to ascertain why Edie would challenge the 2010 wills, when she and her children stood to inherit so much wealth under them. It appears that she was concerned that Myra’s company had increased in value more than hers had. Under a prior will, Chaim’s assets would have been divided equally among his two children and 8 grandchildren (Edie had more children than Myra, so the 2010 division did not benefit Edie and her children as much as the earlier will would have).

Although neither the primary nor the secondary 2010 will had been probated, Edie had taken steps to administer the estate in her capacity as estate trustee: she had written to Maple Leafs Sports and Entertainment in respect of season tickets held by Chaim, she had declared dividends in her corporation, she paid income taxes owing in respect of her corporation, and she acted pursuant to the POA signed on the same day as the will she wished to challenge. In doing so, her actions fit within both the doctrines of estoppel by representation (a representation which is acted on by the representee to his or her detriment) and the doctrine of estoppel by convention (an assumption between the parties as to a state of facts, which would result in unfairness if one party were permitted to resile from the assumption).

Edie’s son, Adam, also brought a will challenge. Unlike his mother, Adam had not made representations to third parties about the will and was not party to transactions based on the assumption that the 2010 wills were valid. Nevertheless, Justice Greer disallowed his will challenge as well, finding that he was acting only as a “straw man” for his mother in the litigation.