By Geoffrey White, K.C., TEP and Braeden J. Rahn, TEP

In a recent unreported decision (KEL-S-S-142912), the Supreme Court of British Columbia ordered that a will be varied to put the plaintiff’s inheritance in a fully discretionary Henson trust to ensure that the gift did not impact her eligibility for disability benefits.  This is a welcome decision that demonstrates that “adequate provision” refers to not only the amount of the testamentary gift, but the manner in which it is given.

Background

Mr. Shah was survived by two daughters.  One of his daughters, the plaintiff, is a person with a disability who receives and relies upon provincial disability assistance.  Mr. Shah’s Will directed his estate be distributed to his two daughters in equal shares.  The will also directed that the plaintiff was to receive a bequest of $200,000.  The will directed that the plaintiff’s share and the plaintiff’s sister’s share were to be held in discretionary trusts.  However, the trusts were drafted in a way that would impact the plaintiff’s eligibility for her provincial disability benefits.  The issues with the trust were:

• The trust named the plaintiff as the sole trustee (to qualify as a fully discretionary Henson trust, the person receiving disability benefits may not act as sole trustee and may not have a power to unilaterally compel distributions or end the trust).
• The trust named the plaintiff and her descendants as beneficiaries (however, to qualify as a Lifetime Benefit Trust (a “LBT”) or a Qualified Disability Trust (a “QDT”), which would receive favourable tax treatment, only a person eligible for the disability tax credit could be the beneficiary during their lifetime).
• The will did not direct the trustee to hold the $200,000 bequest in the trust (the bequest was an outright gift to the plaintiff).

A person in British Columbia may only have $100,000 of non-exempt assets in their name to maintain eligibility for provincial disability benefits.  The $200,000 bequest alone would disqualify the beneficiary from eligibility for her provincial disability benefits.

In addition to the issues regarding the disability benefits, the trust as drafted (not a QDT) would be taxed at the highest marginal tax rate (53.5%).  Further, there would be no opportunity to “roll over” the will-maker’s RRIF account to avoid full taxation as income on his date of death since the trust did not qualify as a LBT.

This is a case of a will-maker attempting to adequately provide for his daughter, but failing in the execution of that intention.  The plaintiff brought a wills variation claim seeking a court order that the trust created for her in the will be varied to ensure it qualifies as a Qualified Disability Trust, a Lifetime Benefit Trust, and a fully discretionary Henson trust.  She also sought an order varying the will to direct that the $200,000 bequest be held in her trust.  She did not seek to increase her share of the estate.  The plaintiff’s sister consented to the orders sought.

The Legal Tests for Variation of a Will

In British Columbia, a deceased person’s spouse or child may apply to the court for an order varying a will if the will, in the court’s opinion, does not made adequate provision for the proper maintenance and support of the spouse or child.  The court is given broad discretion in determining what constitutes “adequate provision” and is given broad discretion to order “proper maintenance and support” (including the ability to order that the plaintiff’s share be held in a trust).

The leading case on wills variation is still the Supreme Court of Canada’s decision in Tataryn v Tataryn Estate (1994 CanLII 51 (SCC)) in which the court held that a will-maker owes legal and moral duties to their spouse and children.  In the case of adult children, the will-maker owes only a moral duty.  The moral duty is an objective standard based on “what a judicious person would do in the circumstances, by reference to contemporary community standards”.  The relevant time period for determining adequate provision is the will-maker’s date of death (not when the will was made or any other time before the will-maker’s death).  A wills variation action is not meant to punish a will-maker for their decision-making, but to ensure that the will-maker’s spouse and children are adequately provided for based on their personal circumstances as of the will-maker’s death.

When determining whether or not the will-maker has met their moral duty to their children (in particular, a child with a disability), the court may take into account (among other factors):

• the size of the estate;
• the reasonably held expectations of the claimant;
• the standard of living of the claimant and the testator;
• the financial need or other personal circumstances of the claimant; and
• disability of the claimant (which invokes a higher moral obligation than to a child without a disability).

Contemporary community standards encourage parents to create discretionary trusts in their wills to hold the inheritance of a person with disabilities.  The trust can be used to meet the needs of the person that their provincial disability benefits are not able to cover.  The Ministry of Social Development and Poverty Reduction’s materials on trusts expressly recommend the creation of Henson trusts to provide for beneficiaries with disabilities.  It is standard legal practice to recommend Henson trusts to hold inheritances for beneficiaries with disabilities.  This practice has been endorsed by the Supreme Court of Canada in S. A. v Metro Vancouver Housing Corp. (2019 SCC 4).

A discretionary trust is what a judicious parent would do for the proper maintenance and support of their adult child.  The trust preserves the stability of the disability benefits and allows the trust to hold the inheritance and pay for “disability related costs” as “exempt income” to improve the adult child’s quality of life.

Distinguishing Damgaard v Damgaard Estate

The previous case of Damgaard v Damgaard (2025 BCSC 208) surprised estate practitioners.  The court did not order variation of a will to place the claimant’s share of the estate in a fully discretionary Henson trust.  The court identified some evidentiary issues, but ultimately held that her share of the estate (approximately $1.8 million) provided “sufficient funds to meet all of her needs and a great many of her wants, without resort to publicly funded disability benefits”.  The court placed significant emphasis on the size of the claimant’s expected share of the estate, and the concerns about the taxpayers of the province paying for her maintenance and support if the order is granted.

In Shah, there were a number of facts that distinguished this matter from Damgaard, including:

• The claimant in Shah was younger than the claimant in Damgaard;
• The share of the estate of the claimant in Shah was approximately $500,000, compared to $1.8 million in Damgaard;
• The evidence provided in Shah detailed budgets of income and expenses, compared to the more general evidence in Damgaard;
• The evidence provided in Shah showed that the plaintiff was currently unable to afford all of her monthly expenses on her disability assistance alone; and
• The will-maker in Shah tried to make a fully discretionary Henson trust and failed, whereas in Damgaard, there was no trust.

The facts in Shah showed greater need by the claimant.  While financial need is not the primary basis for wills variation in British Columbia, it is still a factor that is considered by the court.  The contrast between the court’s decisions in Shah and Damgaard may imply a discomfort by the court to vary a will to preserve disability benefit eligibility where the claimant’s share of the estate is particularly large.

In Damgaard, the court placed some emphasis on the effect that varying the will would have on taxpayers generally.  However, it is submitted that this factor is not appropriate for the court to consider in a wills variation action.  That factor is a policy consideration for the Legislature (moreover, the government policy, as described above, has already weighed in favour of Henson trusts).

The Shah decision is an unreported decision but shows that the Damgaard decision does not signal an end to the use of wills variation to correct deficiencies in wills that cause beneficiaries to lose their disability benefits (wills variation in B.C. is not based purely on financial need).  It is, however, a warning to claimants (and their counsel) that their submissions need to be supported by adequate evidence and a clear statement of the relevant law, including the factors that the court may consider.

Takeaway

The court’s decision in Damgaard v Damgaard Estate has not changed the factors that a court is to weigh when determining whether a will-maker made adequate provision in their will for the care and maintenance of a spouse or child.  Wills variation is still a viable option to preserve eligibility for disability benefits when the will-maker has left an outright gift to a spouse or child receiving disability benefits.  When presented with compelling facts and a carefully constructed argument by counsel referencing the appropriate factors to be considered, the court may still make an order that (to quote former Chief Justice McLachlin) “achieves the justice the testator failed to achieve”.

However, the need to vary a will at all can be avoided by proper planning during the will-maker’s lifetime.  The need to vary the will in Shah would have been avoided if the trust had been drafted with the knowledge of what is required when planning for persons with disabilities.  This is why it is important to have a will drafted by an experienced lawyer who can ensure that the will does not create an unanticipated burden on the beneficiaries.

For guidance on estate planning and estate administration strategies to protect a person and their disability benefits, please contact Geoffrey White, K.C., TEP, Braeden Rahn, TEP, or any member of our Estates & Trusts group.