It has been said that there are two certainties in life—death and taxes. Unfortunately, there are many more uncertainties about what the future holds which can impact one`s estate plan—even if your estate plan is to have no estate plan! The cases demonstrating the value of having cash on hand for payment of estate expenses and debts as soon as possible after death are as numerous as life`s uncertainties…
Bergmann v. Amis, 2009 CanLII 66389 (ON SC), is a case in which the beneficiaries of an estate accused the estate trustee of various infractions for which they asked the court to remove him. The home occupied by the deceased’s common law spouse after his death was the only tangible asset in the estate. A first mortgage was paid in full by mortgage insurance; however a second mortgage of $65,000 remained on the home.
There were also arrears of property taxes in the amount of $13,000.00. Although payments were made after death by the appointed estate trustee, by 2008, the taxes were in arrears again in the amount of $13,811.30. The City of Mississauga notified by letter its intention to sell the property in order to satisfy the amount of the taxes outstanding. Various options were canvassed to pay the amounts for the mortgage and realty taxes, including:
1. asking the lender to pay the taxes and to add the amount to the mortgage;
2. asking the common law spouse to pay it as a rent for her occupancy; or
3. borrowing from her the amount of the mortgage.
It was decided between the relevant parties that none of the proposed options were acceptable.
In his affidavit dated October 23rd, 2008 the estate trustee indicates that the estate has no money to pursue the various courses of action recommended by the beneficiaries, and he he is waiting for the dispute between the parties to be resolved after which time he will settle the estate.
The estate trustee further stated that as the estate has no money, there is no means to evict the common law spouse or to pursue the payment of occupation rent from her. He further confirmed that realty taxes in respect of the Estate Home have accrued simply because there was no money in the estate available to pay the taxes on a regular basis.
In granting the removal of the estate trustee, the court observed that he offered no evidence of any intention to take steps to preserve the value of the asset by, for example, selling the Estate Home, and after receiving a fair market value for the property, placing the proceeds in court pending the resolution of the claims outstanding.
In the end of this case, it still remained unsettled who should bear the costs of the unpaid realty taxes. The case underscores the importance of not only putting in place a will or an estate plan, but also anticipating reasonably foreseeable expenses and debts in order to make provision for them. If no provision is made, it is uncertain that the estate plan can be carried out, as estate assets may have to be sold to satisfy these obligations rather than being transferred to the intended beneficiaries. Towards this end, life insurance and other financial planning tools should be explored and implemented.
For further information about how best to ensure adequate monetary resources for your estate or for a referral to a financial advisor, please contact Andrea Kelly.
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Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters. She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process. This is quite often enlightening for her clients and facilitates individually tailored services. If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.