CANADA Trends and Developments Contributed by: Ian M Hull, Suzana Popovic-Montag and Nick Esterbauer, Hull & Hull LLP
Gifting Corporate Assets and Interests Through Wills When a person who is a shareholder in a corporation makes a will in Canada, unique estate planning con- siderations come into play if the shareholder wants to use their will to gift either assets owned by the corporation, or their interest in the corporation. The type of corporate gifts that may be given through a will, and even the way that wills which gift corporate interests or assets may be structured, tends to vary across Canada, depending on factors that include the law in each province and territory, and the terms of a corporation’s governance documents. In recent years, there have been a number of significant legal develop- ments with respect to: • whether shareholders may gift corporate assets through a will; • the use of multiple wills to gift corporate interests and/or corporate assets; • the consequences that arise when testamentary gifts consisting of corporate shares are inconsist- ent with the terms of corporate governance docu- ments, such as shareholders’ agreements; and • when liabilities owed by a corporation to a share- holder are to be included in a testamentary gift consisting of either the shareholder’s shares or corporate interests. The following discussion examines each of these developments in turn, illustrating how the legal frame- work governing testamentary dispositions of corpo- rate assets and corporate interests is evolving across Canada, albeit in a somewhat inconsistent way. Gifting corporate assets Testamentary gifts consisting of a corporate inter- est, such as shares, are distinct from gifts consist- ing of corporate assets. Whereas a shareholder is recognised as the legal owner of corporate shares, that shareholder technically is not the owner of cor- porate assets, even where the corporation has only one shareholder. Rather, corporate assets are legally owned by the corporation. In light of this legal distinction, in some jurisdictions in Canada, the courts have held that a shareholder may not gift property owned by a corporation in their
will, even if they are the corporation’s sole sharehold- er. This has long been recognised as the law in the province of Saskatchewan, as demonstrated by the decision of the Court of Queen’s Bench in Hickson v Wilhelm , 1997 CanLII 11088. On appeal, in Hickson v Wilhelm , 2000 SKCA 1, the Court of Appeal affirmed that a lawyer who drafted a will to gift corporate assets could be held liable by the disappointed beneficiaries due to the failure of the gift. In other Canadian jurisdictions, however, the courts have taken a permissive approach in recent years, holding that it is possible to gift corporate assets through a will. For example, in Ontario, the Court of Appeal held in Trezzi v Trezzi , 2019 ONCA 978 that a testator may gift corporate assets in their will directly to an intended beneficiary so long as they are the sole shareholder and dispose of substantially all of the cor- porate assets in their will, so that the corporation may be wound up. The courts in Ontario have also recognised other cir- cumstances under which a shareholder may dispose of corporate assets through their will. In Estate of John Kaptyn , 2010 ONSC 4293, the Ontario Superior Court of Justice indicated that a shareholder could dispose of corporate property in their will if they are the only person who can control the property through the cor- poration. The Ontario Court of Appeal also held in McDougald Estate v Gooderham , 2005 CanLII 21091 that a will which gifted corporate property could be honoured, since the will expressly authorised the executor of the estate to do whatever is “necessary to transfer prop- erty held by the corporation to the beneficiary”. The law in Alberta with respect to gifting corporate assets currently appears to be shifting. Historically, the courts in Alberta took the same position as the courts in Saskatchewan, holding that a testamentary gift consisting of a corporate asset could not be hon- oured, as the property belonged to the corporation rather than the testator: see MacRae (Estate) , 2011 ABQB 277 and Meier v Rose , 2012 ABQB 82. However, recently in Petropolous Estate (Re) , 2026 ABKB 121, the Court of King’s Bench applied the
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