The Power of Estate Trustees to Deal with Estate Assets Following the Expiry of an Initial Life Interest
Overview
In the matter of the Estate of Sheffield (Estate) v. Sheffield[1], the Ontario Superior Court found that an Estate Trustee remained empowered to sell real property following the expiry of a prior life interest, rather than possession of the property immediately passing to the subsequent beneficiaries.
Background
The Deceased left a Last Will & Testament providing his widow (the “Widow”) with an interest to reside in real property (the “Property”) for “as long as she is able.” Upon the expiry of the Widow’s interest, the Property was to be given to the Deceased’s daughter (“Daughter”) and son (“Son”) “in equal shares per capita.”
The Deceased’s will also appointed his Daughter as Estate Trustee.
At the time of the Widow’s death, she had been residing in the Property with the Son. Their occupation of the Property lead to deterioration and other maintenance issues.
Position of the Parties
The Estate Trustee sought to sell the Property and distribute the proceeds of sale to herself and the Son, rather than distributing the Property in kind. The Estate Trustee relied on language in the Deceased’s will empowering her to liquidate all estate assets, including the Property, and distribute them in cash.
By contrast, the Son claimed that his and the Daughter’s interest in the Property vested immediately upon their father’s death, and that their entitlement to possession further crystallized upon the expiry of the Widow’s interest. The Son relied on a number of cases providing that “where the payment of a fund is postponed until the death of a life tenant, the ultimate legatees take a vested interest in the fund at the time of the death of the testator, unless there are indications in the will that such presumption be displaced.”[2]
Analysis
In determining that the Estate Trustee retained their power to sell the Property following the expiry of the Widow’s initial interest, the court first considered language in the Deceased’s will that:
- Empowered the Estate Trustee to liquidate all assets of the estate and distribute them in cash, subject to the widow’s life interest; and
- Provided the disposition of the Property to the Brother and Sister “in equal shares per capita” without any further language establishing possessory rights.
The court then considered sections 121 and 63 of the Land Titles Act, R.S.O. 1990, c. L.5; 1998, c. 18, Sched. E, s. 126, and section 2(1) of the Estates Administration Act, R.S.O. 1990, c. E.2, the effect of which required the Estate Trustee to become the registered owner of the Property upon the Widow’s death such that the Estate Trustee held the Property subject to the same rights and interests as the Deceased had.
Accordingly, the court found that the Estate Trustee retained their power to sell the Property as they were permitted, but not required, to transfer the Property in kind:
When the express language of the testator is read in the context of the will as a whole, as well as the statutory scheme providing for the administration of estates and the transfer of title from a deceased person to the personal representative(s) of his or her estate, it should be read as permitting, but not mandating, the transfer of the Property from the Estate to Ms. Markolefas and Mr. Sheffield.
Concluding Comments
Following the expiry of an initial life interest, Estate Trustees retain their authority to deal with estate assets. The scope of such authority will be determined by the wording of the Deceased’s will, both holistically and specifically, as well as relevant statutory authorities including, but not limited to, the Land Titles Act and Estates Administration Act.
With respect to real property, these asset(s) will not automatically vest in subsequent beneficiaries upon the death of the testator, with possessory rights further crystalizing upon the expiry the initial life interest but will instead be registered to the Estate Trustee as owner.
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[1] Sheffield (Estate) v. Sheffield, 2024 ONSC 3627.
[2] Ibid at para 16; Browne v. Moody, 1936 CanLII 119 (UK JCPC), [1936] O.R. 422 (J.C.P.C.); Re Smoke, [1973] 3 O.R. 100 (H.C.J.); and Re Oswell (1982), 1982 CanLII 1877 (ON SC), 38 O.R. (2d) 71 (H.C.J.).
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Written by: WEL Partners
Posted on: July 25, 2024
Categories: Commentary, WEL Newsletter
Overview
In the matter of the Estate of Sheffield (Estate) v. Sheffield[1], the Ontario Superior Court found that an Estate Trustee remained empowered to sell real property following the expiry of a prior life interest, rather than possession of the property immediately passing to the subsequent beneficiaries.
Background
The Deceased left a Last Will & Testament providing his widow (the “Widow”) with an interest to reside in real property (the “Property”) for “as long as she is able.” Upon the expiry of the Widow’s interest, the Property was to be given to the Deceased’s daughter (“Daughter”) and son (“Son”) “in equal shares per capita.”
The Deceased’s will also appointed his Daughter as Estate Trustee.
At the time of the Widow’s death, she had been residing in the Property with the Son. Their occupation of the Property lead to deterioration and other maintenance issues.
Position of the Parties
The Estate Trustee sought to sell the Property and distribute the proceeds of sale to herself and the Son, rather than distributing the Property in kind. The Estate Trustee relied on language in the Deceased’s will empowering her to liquidate all estate assets, including the Property, and distribute them in cash.
By contrast, the Son claimed that his and the Daughter’s interest in the Property vested immediately upon their father’s death, and that their entitlement to possession further crystallized upon the expiry of the Widow’s interest. The Son relied on a number of cases providing that “where the payment of a fund is postponed until the death of a life tenant, the ultimate legatees take a vested interest in the fund at the time of the death of the testator, unless there are indications in the will that such presumption be displaced.”[2]
Analysis
In determining that the Estate Trustee retained their power to sell the Property following the expiry of the Widow’s initial interest, the court first considered language in the Deceased’s will that:
The court then considered sections 121 and 63 of the Land Titles Act, R.S.O. 1990, c. L.5; 1998, c. 18, Sched. E, s. 126, and section 2(1) of the Estates Administration Act, R.S.O. 1990, c. E.2, the effect of which required the Estate Trustee to become the registered owner of the Property upon the Widow’s death such that the Estate Trustee held the Property subject to the same rights and interests as the Deceased had.
Accordingly, the court found that the Estate Trustee retained their power to sell the Property as they were permitted, but not required, to transfer the Property in kind:
When the express language of the testator is read in the context of the will as a whole, as well as the statutory scheme providing for the administration of estates and the transfer of title from a deceased person to the personal representative(s) of his or her estate, it should be read as permitting, but not mandating, the transfer of the Property from the Estate to Ms. Markolefas and Mr. Sheffield.
Concluding Comments
Following the expiry of an initial life interest, Estate Trustees retain their authority to deal with estate assets. The scope of such authority will be determined by the wording of the Deceased’s will, both holistically and specifically, as well as relevant statutory authorities including, but not limited to, the Land Titles Act and Estates Administration Act.
With respect to real property, these asset(s) will not automatically vest in subsequent beneficiaries upon the death of the testator, with possessory rights further crystalizing upon the expiry the initial life interest but will instead be registered to the Estate Trustee as owner.
—
[1] Sheffield (Estate) v. Sheffield, 2024 ONSC 3627.
[2] Ibid at para 16; Browne v. Moody, 1936 CanLII 119 (UK JCPC), [1936] O.R. 422 (J.C.P.C.); Re Smoke, [1973] 3 O.R. 100 (H.C.J.); and Re Oswell (1982), 1982 CanLII 1877 (ON SC), 38 O.R. (2d) 71 (H.C.J.).
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