[co-author: Nielsen Beatty - Summer Student]
In the June 2020 case of Bergler v. Odenthal, 2020 BCCA 175 [Bergler], the British Columbia Court of Appeal found that deathbed wishes created a "secret trust", which required the surviving common law spouse to hold the deceased's estate in trust for the deceased's niece. The secret trust also severed the joint tenancy of the defendant and the deceased in property they had purchased together, so that the property no longer passed to the surviving spouse by right of survivorship.
The Bergler case is a reminder that a surviving spouse, or any person who stands to inherit, should be careful before accepting requests from the dying person as to how to deal with his or her property. Sometimes, it is better to just say "no": verbally acquiescing or even the failure to say anything could mean the heir becomes a trustee for the benefit of someone else.
Secret trusts are rarely encountered but have a long history. A secret trust is an exception to the common law rule that any disposition on death must be by way of a will.
The two essential conditions for creating a secret trust are "communication of intention"—the request of the deceased person to his or her heir to hold or gift the property to a third party—and acceptance. The secret trust must also meet the usual trust requirements of certainty of intention, objects and subject matter.
In Bergler, evidence at trial had established clear communication of the deceased's intention to create a secret trust, which was not challenged on appeal. The focus of the appeal was the question of acceptance, which the defendant argued must also be clearly proven. The defendant argued that, absent a high evidentiary standard, "vulnerable or grieving spouses may find themselves susceptible to 'mischief, fraud and misery' on the basis of disputed conversations or adverse findings of credibility" (at para 27).
The defendant admitted that, although he had expressed unhappiness to the deceased about her wishes, he had in fact told her that he would abide by them. This established acceptance.
In dismissing the appeal, the Court of Appeal also relied on the longstanding principle of law that, for secret trusts, acceptance can be inferred from silence: "acceptance by the recipient […] is readily inferred once communication occurs unless he protests" (at para 29). In other words, if one wishes not to become a trustee, one must speak up and refuse.
The Court of Appeal thus upheld the finding of the trial court that the defendant had accepted the deceased's request that he transfer her estate to her niece if he found a new romantic partner. The defendant had married, triggering the requirement to transfer the trust assets to the beneficiary.
Severance of a Joint Tenancy Through a Secret Trust
The Court of Appeal also briefly considered whether the joint tenancy of the defendant and the deceased in property purchased together was severed by the secret trust. The Court held that there is no difference in this regard between an ordinary declaration of trust, and the acceptance by a trustee of an obligation of a secret trust: both sever a joint tenancy (at para 40).