Estate Planning

An Annuity by Will

By Hull & Hull LLP

Annuities are often employed when an individual plans his or her estate. We have covered different aspects of annuities on past blogs on Hull on Estates.

A testator, for example, may choose to have one child’s portion of the future estate placed into an annuity that will create a flow of money over time. The child would have access to the cash flow, but not necessarily access to the principal amount. 

In September 2008, Gayle Reid applied to the Superior Court of Justice for an interpretation.  The claimant’s father, Bernard Wiesberg, died and left an annuity to his friend, Avonne Richter (also identified as his common-law spouse). Minimum annual payments of the annuity were directed in the Will to Ms. Richter who received them from 2003 through to 2007. 

The Applicant was to receive the residue of her father’s estate.  A 2005 Order by Dandie  J.  required Ms. Richter to designate Ms. Reid as the beneficiary.  (A provision of the Income Tax Act required the beneficiary to be named, otherwise the retirement income fund would have collapsed, defeating the testator's intent.)

The issue arose when Ms. Richter, who received the previous annual annuity payments in arrears up to 2006, chose to take the $17,015.57 payment in January, in advance for that year. Ms. Richter died on April 17, 2007.

The Applicant sought an interpretation of her father’s Will, specifically regarding the annual payments. As the payments were for the “lifetime” of Ms. Richter, the Estate owed $12,027.44 to the Applicant because the Court reasoned that calculations must be made to the date of Ms. Richter’s death. Therefore a pro-rata calculation was “the only reasonable and fair manner to ensure the two gifts in the Will are honoured.”

If the annuity had been paid in arrears that December, Ms. Richter’s Estate would have been owed a pro-rata amount of the annuity for that year calculated to the date of her death.

Have a good day.

Jonathan

Full post as published by Toronto Estate Law Blog on January 27, 2009 (boomark / email).