Pursuant to Section 9(1) of Ontario’s Estate Administration Act<\/em>[1]<\/a> (the \u201cEAA<\/em><\/strong>\u201d),<\/p>\n\n\n\n Real property not disposed of, conveyed to, divided or distributed among the persons beneficially entitled thereto under section 17 by the personal representative within three years after the death of the deceased is, subject to the Land Titles Act<\/em> in the case of land registered under that Act and subject to subsections 53(3) and (5) of the Registry Act, and subject as hereinafter provided, at the expiration of that period, whether probate or letters of administration have or have not been taken, thenceforth vested in the persons beneficially entitled thereto under the will or upon the intestacy or their assigns without any conveyance by the personal representative\u2026.<\/p>\n<\/blockquote>\n\n\n\n To summarize, real property will vest automatically in the person(s) entitled to it upon the three-year anniversary of the death of the deceased owner of the property under section 9 of the EAA<\/em>.<\/p>\n\n\n\n However, Section 10 of the EAA<\/em> provides that:<\/p>\n\n\n\n Nothing in section 9 derogates from any right possessed by an executor or administrator with the will annexed under a will or under the Trustee Act or from any right possessed by a trustee under a will.[2]<\/a><\/p>\n<\/blockquote>\n\n\n\n So, what does this mean for the drafting solicitor?<\/p>\n\n\n\n Take, for example, a matrimonial home.[3]<\/a> If two spouses own a matrimonial home as joint tenants, on the death of one spouse, the property passes to the other by right of survivorship. Accordingly, the automatic vesting rule pursuant to section 9(1) of the EAA<\/em> will, in this circumstance, be inapplicable. In other words, if a joint tenant co-owner dies, the surviving co-owner will automatically inherit the deceased co-owner\u2019s share of the property. Thus, the drafting solicitor need not address the application of the automatic vesting rule (or include a devise of the property to the surviving joint tenant within the will) in this scenario.<\/p>\n\n\n\n However, when spouses own property jointly as tenants in common, or title to the spouses\u2019 matrimonial home is held by only one spouse, it is imperative that the drafting solicitor turn their mind to the testator\u2019s intention regarding the distribution of the testator\u2019s ownership interest in the property at the time of their death. If the intention of the testator is to have their interest in the matrimonial home pass to the other spouse on their death, this intention must be clearly identified<\/strong> in the testator\u2019s will. A failure to do so will not<\/strong> be rectified by the automatic vesting rule, for reasons discussed below.<\/p>\n\n\n\n In Di Michele v. Di Michele<\/em>,[4]<\/a> the deceased was the sole registered owner of the family home at the date of her death. The deceased included discretionary language in her will that provided the estate trustee with the power to sell property at such times and in such manner as the estate trustee deemed fit.[5]<\/a> The will left the entirety of the deceased\u2019s estate to her three children in equal shares. The estate\u2019s only asset was the family home. Litigation ensued between the deceased\u2019s three adult children with respect to the property.<\/p>\n\n\n\n The Ontario Court of Appeal held that the automatic vesting rule pursuant to section 9 of the EAA<\/em> did not<\/strong> apply as the deceased had given the estate trustee a discretionary power in her will to sell the property, thereby constituting a contrary intention to the application of section 9 of the EAA<\/em>. The Court referred to section 10 of the EAA<\/em>, which ousts the application of section 9 of the EAA<\/em> when such application would derogate from any right possessed by the estate trust under the will.<\/p>\n\n\n\n In addition, the Ontario Court of Appeal held that the beneficiaries did not have vested interests in the property as there was no specific bequest of the family home within the will to any of the deceased\u2019s three adult children and therefore the interests of each of the beneficiaries was contingent until the date of distribution.[6]<\/a><\/p>\n\n\n\n In Kuzyk v Romaniuk<\/em>,[7]<\/a> the Ontario Superior Court of Justice followed the decision in Di Michele<\/em>. In this case, a dispute arose where one of multiple beneficiaries sought to sell a home, arguing that his interest should be vested in him pursuant to section 9(1) of the EAA<\/em>. The Ontario Superior Court of Justice found that the deceased\u2019s will granted the estate trustees the discretion to \u201cto sell, mortgage . . . or otherwise dispose of my [the] estate . . . at such time or times, in such manner and upon such terms . . . as my [the] said Trustees . . . decide upon . . ..\u201d[8]<\/a> Citing Di Michele<\/em>, the Court concluded that:<\/p>\n\n\n\n . . . where the will gives the estate trustee power to sell a property at such time and in such manner as the estate trustees see fit, it is this expressed intention that must prevail. Where the estate trustee possesses this right under the will, s. 10 of the Act provides that s. 9 of the Act will not derogate from that right. Section 9 will not limit the scope of the power that the testator has given to the estate trustee by requiring that the property vest in the beneficiaries after three years. It is in this sense that the testator\u2019s intention is paramount. [9]<\/a><\/p>\n<\/blockquote>\n\n\n\n In Proudfoot Estate, Re<\/em>,[10]<\/a> the Court was tasked with determining whether a farm owned by the testator vested in the beneficiaries three years after the death of the testator. Contrary to the circumstances in the above noted case law, the testator had devised the farm to her children in her will and devised the residue of her estate to her Trustees upon certain trusts, including a power of sale, but specifically excluded<\/em> any real estate \u201chereinbefore specifically devised.\u201d The Court held that the intention of the testator was paramount. Specifically, the Court found that because the testator had specifically devised the farm to her children in the will, it would vest in the children three years after her death:<\/p>\n\n\n\n I reject the proposition that, wherever there is an express or implied power to sell in a will, lands cannot vest in the beneficiaries pursuant to the now Estates Administration Act<\/em>. I find one must have regard to the intention of the testator as expressed in the will. In the matter before me nothing could be clearer than the testator’s intention to separate the Burlington farm from the express power to sell and the implied power which can be derived from a direction to pay debts. I find the Burlington farm vested in the named devisees three years after the date of death of Catherine Laing Proudfoot.[11]<\/a><\/p>\n<\/blockquote>\n\n\n\n To summarize the principles enumerated in the case law noted above, where there is an express or implied power to sell, mortgage, or dispose of property given to the estate trustee(s) in a testator\u2019s will, property owned by the deceased at the time of their death will not<\/strong> be subject to the automatic vesting rule pursuant to section 9 of the EAA<\/em>. Consequently, if it is the intention of the testator to leave their interest in certain property to intended beneficiaries, the will must either: (1) specifically exclude such property from the discretionary power of the estate trustee(s) to sell, mortgage, or dispose of; or (2) the will should not provide the estate trustee(s) with the discretionary power to sell\/mortgage\/dispose of property; or (3) as noted above, the will should specifically devise the testator\u2019s interest in their property to the testator\u2019s intended recipient.<\/p>\n\n\n\n Circling back to the matrimonial home example, even in circumstances where the entirety of the residue of the testator\u2019s estate is left to their surviving spouse and the spouse is the estate trustee of the testator\u2019s will, if there is an express or implied power to sell the testator\u2019s property within the will (even if such property is the matrimonial home) the automatic vesting rule will be inapplicable such that the surviving spouse will not automatically inherit title to their matrimonial home. In some circumstances, this would have the likely unintended result of the surviving spouse having to pay probate fees on their matrimonial home.<\/p>\n\n\n\n In Smith v. Smith<\/em>,[12]<\/a> the will in question stated that the residue of the estate would be given to the applicant, who also happened to be the estate trustee. The issue was whether the property owned by the deceased automatically vested in the applicant three years after the deceased\u2019s death. The Court held that property may automatically vest if there is a specific interest in the property conferred on the beneficiary, rather than an interest in the residue of the estate. The Court in Smith <\/em>held that section 9 of the EAA<\/em> does not operate to vest the property in the applicant, as the applicant does not have interest in the property, but rather, a beneficial interest in the residue of the estate:<\/p>\n\n\n\n The language in the Will is almost identical to the language the Court of Appeal in Di Michele<\/em> relies on to determine that the entitlement under the Will does not amount to an interest in the Property. The result is the same in this case. The Applicant does not have an interest in the Property, but a beneficial interest in the residue of the Estate. This does not give rise to a property interest in any specific asset of the Estate<\/strong>.[13]<\/a> [emphasis added]<\/p>\n<\/blockquote>\n\n\n\n Before preparing a client\u2019s will, the drafting solicitor must inquire as to how all assets are held by the testator. Whenever the testator owns real property, it is best practice to conduct a title search on the property to confirm how title to the property is held. The solicitor should then ask the client about their testamentary intentions with respect to the disposal of their interest in their property on their death. This information should be reflected in the client\u2019s will and diligently recorded in the solicitor\u2019s file notes. As the case law referred to above indicates, failure to properly consider the devise of a client\u2019s property within their will pursuant to their intentions will evidently not be saved by the automatic vesting rule in all circumstances.<\/p>\n\n\n\n This article was authored by a former Associate with Miller Thomson. Should you have any questions, please reach out to a member of Miller Thomson’s Private Client Services<\/a> team.<\/em><\/p>\n\n\n\n [1]<\/a> Estates Administration Act<\/em>, R.S.O. 1990, c. E.22, section 9.<\/p>\n\n\n\n [2]<\/a> Estates Administration Act<\/em>, R.S.O. 1990, c. E.22, section 10.<\/p>\n\n\n\n [3]<\/a> Family Law Act<\/em>, R.S.O. 1990, c. F.3, section 18.<\/p>\n\n\n\n [4]<\/a> Di Michele v. Di Michele<\/em>, 2014 ONCA 261.<\/p>\n\n\n\n [5]<\/a> Ibid<\/em>, at para 101.<\/p>\n\n\n\n [6]<\/a> Ibid<\/em>, at para 103.<\/p>\n\n\n\n [7]<\/a> Kuzyk v Romaniuk<\/em>, 2015 ONSC 5995.<\/p>\n\n\n\n [8]<\/a> Ibid<\/em>, at para 17.<\/p>\n\n\n\n [9]<\/a> Ibid<\/em>, at para 28.<\/p>\n\n\n\n [10]<\/a> Proudfoot Estate, Re<\/em>, [1994] O.J. No. 704.<\/p>\n\n\n\n [11]<\/a> Ibid<\/em>, at para 20.<\/p>\n\n\n\n\n
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Ontario case law<\/h2>\n\n\n\n
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Closing thoughts<\/h2>\n\n\n\n
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