Beware the “Pour-over Clause”

The formal requirements for a valid will can pose problems when testators seek to incorporate by reference other documents into a will. This is especially problematic where the document intended to be incorporated is changed after the date of the will. This was the issue in a recent British Columbia case.

In Kellogg Estate v. Kellogg, the Court was dealing with what is referred to as a “pour-over” clause. The purpose of the clause was to make a gift under a will to an existing trust. A husband and wife established a family trust for estate planning purposes with their three children as the primary beneficiaries. The trust included a provision that upon the death of the survivor of the husband and wife, the primary beneficiaries were to receive equal shares in the balance; one half distributed on the surviving parent’s death and one half five years later.

The husband and wife both executed wills dated the same date as the trust. Their wills included a bequest of the residue of their respective estates to the trust, to be administered in accordance with the trust, “including any amendments thereto made before my death”. The Wills also included a clause stating that if a bequest to the trust was invalid, the residue of the respective estates were to be managed and distributed under the terms of the trust as it existed immediately prior to its determination of invalidity and incorporated the trust by reference into the will.

Subsequent to the execution of the wills, the parents amended the trust, the primary change being the removal of one child as a beneficiary.

The issue for the Court was whether, firstly, incorporation of the trust into the wills of the parents generally was valid and, secondly, whether the subsequent amendment to the trust was likewise incorporated into the wills.

The Court conducted a review of the relevant law of incorporation into a will. It concluded that incorporation of a document into a will is valid if (1) the document is in existence at the time the will is made and (2) the document is beyond doubt the document referred to. The Court found that the original trust met this test and could properly be incorporated into the parents’ wills.

As for the amendment though, because it post-dated the wills, it did not meet the test for incorporation. As a result, it could only have testamentary effect if it met the requirements of the B.C. Wills Act, in particular the requirement for two witnesses (s. 4 of the Succession Law Reform Act in Ontario). The trust amendment was not witnessed.

But what of that part of the incorporation provision in the wills stating, “including any amendments thereto made before my death”. This provision was not effective to include the amendment as a testator may not reserve the ability to make gifts upon death after the date of the will without complying with the requirements of the Wills Act.

The effect of the decision is that the residue of the estates was a valid bequest to the trust as it existed before the amendment; i.e. with all three children as beneficiaries.

This decision underlies the need to always keep in mind the formality requirements for documents intended to have testamentary effect.

4 Comments to “Beware the “Pour-over Clause””

  1. This is why I dislike pour over language and prefer to restate by parallel language who inherits and under what terms.
    With word processing why would anyone do otherwise?

  2. The brief bit of research I did seems to suggest somewhat of a split of authority on this. Obviously this is a case out of Canada, which could be considered instructive for its reasoning, but certainly not binding (except in Canada). Be interesting to know what experience lawyers in the States have had with this.

  3. Greg, thanks for the comment. It is interesting that in this case the Court actually did reference legislation in the State of Washington that permits pour-over clauses

  4. Very useful insight. Thank you.

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