Gail Evans died intestate on July 30, 1992. She was survived by her two sons from a first marriage, Richard and Donald, and by her second husband, Carlton. Carlton was the administrator (i.e. estate trustee) of Gail’s estate. The parties agreed Carlton was entitled to a preferential share of $75,000 and one third of the residue of Gail’s property. Richard and Donald were also each entitled to one third of the residue.
The largest asset in the estate was a house. Gail and Carlton owned the house as tenants in common. Gail held a 90% interest in the house and Carlton a 10% interest. Since Gail’s death, Carlton had occupied the house, paid the taxes and other expenses. Carlton caused the mortgage to be discharged in 2012. Carlton paid no occupation rent to the estate.
The issue on appeal before the Ontario Court of Appeal in Fray v. Evans was whether the value of Richard and Donald’s interest in the house was fixed as at the date of their mother’s death or the date of the distribution of the estate (many years later). The date of death value of the house was $200,000, while the value of the house at the time of the court hearing was $650,000.
Between 1992 and 2011, Carlton, as administrator, made several payments to Donald and Richard with respect to their “inheritance” from their mother’s estate. Carlton ultimately took the position that Richard and Donald had been paid in full based on the date of death value of the house (netted after expenses). Carlton commenced an application requesting a declaration that he was the sole owner of the house and that the brothers’ entitlement had not only been satisfied but they had been overpaid.
The Court of Appeal held that the valuation date for purposes of calculating entitlement to a preferential share was date of death. Carlton was therefore entitled to receive $75,000 (the value of his preferential share in 1992). However, value of the residue (which was to be divided three ways between Richard, Donald and Carlton) could only be ascertained on the collection and conversion of Gail’s assets and distribution to the beneficiaries. The Court noted that the valuation of assets to be distributed among beneficiaries is made as of the date of distribution and not date of death. The Court therefore held that the application judge erred in valuing Richard and Donald’s interest in the residue as of the date of their mother’s death. “The residue of an estate is crystalized and determined after the deceased’s property has been collected and debts and expenses paid including those associated with the administration of the estate”. The brothers were therefore able to benefit from the appreciation of the value of the house since their mother’s death.
Happy Litigating.
