The decision of Klotz v. Funk, 2019 BCSC 817 looks at the factors the Court will consider when deciding whether to vary a will in favour of a spouse.
In this case, Herbert Klotz sought to vary the will of his spouse, Lorraine Klotz. Mrs. Klotz’s will gave Mr. Klotz a life estate in her interest in their home, allowing him to occupy the home provided that he paid the expenses relating to the property. Upon Mr. Klotz’s decision to sell the home, or on his death, her interest or the proceeds of sale of same were to pass to her children.
The parties had been in a relationship for approximately 20 years and had held the property as joint tenants until Mrs. Klotz received a terminal cancer diagnosis in the year before her death. Following this diagnosis, she caused the joint tenancy to be severed resulting in her and Mr. Klotz each having a 50% interest in the property as tenants in common. The couple also had new wills drafted setting out the surviving spouse’s right to a life estate, with the residue of their respective estates going to their children. Mr. Klotz initially declined to sign the will, and testified that he relented due to wanting to see Mrs. Klotz live her final days in peace and comfort.
Following her diagnosis, Mrs. Klotz also began to liquidate and transfer assets, and spent a significant portion of the liquidated funds on travelling with Mr. Klotz and her family prior to her death. At the time of her death, her interest in the real property, valued at approximately $357,000, was the only significant asset of her estate.
The Court declined to vary Mrs. Klotz’s will, finding that the provisions met the standard of what was adequate, just, and equitable in the circumstances.
In determining what is adequate, just, and equitable, the Court considered both Mrs. Koltz’s legal and moral obligations to her spouse, and whether the provisions of her will met these obligations.
In considering her legal obligations, the Court looked at what Mr. Klotz’s right to the property would have been had the parties separated immediately following Ms. Klotz’s diagnosis, referred to as notional separation. The Court based the notional separation on this period as opposed to the date of Mrs. Koltz’s death, as that was the period in which she began to liquidated and dispose of assets.
The Court considered the fact that the property had previously been held in joint tenancy, and that it likely would have been divided equally had the parties separated, leaving Mr. Koltz with a 50% interest on separation. The Court also noted that, had Mr. Koltz wanted to control the handling of the property on separation or death, he could have entered into a marriage agreement.
The acquisition and contribution to the property was included in the Court’s analysis. Equal division of family property on separation is a starting point, and parties can claim an unequal division is situations where equal division would be significantly unfair. The Court looked at the history and acquisition of the real property, which was owned by Mr. Koltz as bare land prior to the relationship commencing, with the house being built by the parties during the relationship, with direct and indirect contributions by Mrs. Kotlz. The Court confirmed that, in absence of other circumstances, unequal contributions to family assets and income will not support a claim that equal division is significantly unfair.
The analysis of the moral obligation considered what society’s reasonable expectations of what a judicious person would do in the circumstances. In determining that Mrs. Koltz had satisfied her moral obligation to her spouse, the Court pointed to the fact that there was little risk that Mr. Koltz would be without a home, as he controlled the terms of the life estate, and that he would receive half of the proceeds of sale if the property were sold. The Court found that Mrs. Koltz had prioritized his interests by postponing the gift to her children, making their interests secondary to those of her spouse.