Are Cheques Payable To Beneficiaries A Valid Substitute For A Will?
People will do all sorts of things to try to get out of the probate fees associated with transferring property after a death. What happens if the testator writes cheques to his or her intended beneficiaries with instructions to cash them after death? Are the cheques valid gifts and, therefore, outside the scope of the estate?
The short answer is no.
This situation was tried by the courts a few years ago, back in 1911 when Matilda Bernard came up with what she likely thought was an ingenious plan. She wrote a cheque to her sister, the intended beneficiary, and kept it in her cash box along with the note that the cheque was to be cashed a month after her death. Her sister tried to cash the cheque, unsuccessfully.
The court at both the trial level and appeal rejected the sister's claim on the grounds that a cheque is not a gift but rather an authorization to pay. The death of the drawer (person who writes the cheque) revokes the authorization. Even with the note attached the cheque was insufficient to become a valid testamentary disposition or even a gift given in contemplation of death.
The Lesson: There are specific laws governing the transfer of property following death that must be adhered to. In this case, the testator attempted to get around the laws and the gift failed. It is wise to seek competent legal advice concerning the transfer of property both through a will or outside of a will.
Re Bernard, (1911) CarswellOnt 111, (ON Div Ct.)
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