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dividing estate when intestate
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Who is in charge here?

A review of the recent decision in McQuoid v. Patterson

McQuoid v. Patterson1 is a very interesting case that raises a number of different issues.  The late Arthur Marvin Patterson Junior (“Arthur”) died intestate.2  Had he made a Will, Arthur could have chosen an estate trustee whose responsibility it would be to gather in his assets, pay his liabilities, and distribute Arthur’s assets as provided for on his Will.  Given that there was no Will, two principal questions had to be answered:

  1. Who is entitled to inherit Arthur’s assets?
  2. Who should administer Arthur’s estate, including representing the estate in litigation?

Unfortunately, Arthur’s family had to go to court to have these questions answered.

(1) Who is entitled to inherit Arthur’s assets?

Part II of the Succession Law Reform Act (the “Act”) sets out a regime which provides for who is entitled to Arthur’s estate given that he died “intestate” (that is, without a Will). These rules are based on the assumption that a person who dies without a Will wishes to leave his or her estate to their closest family, who become the rightful heirs of the estate as a matter of law. Although Linda Carol McQuoid (“Linda”) was Arthur’s common law spouse, she was not entitled to any inheritance under the intestacy rules.3 If she was Arthur’s married spouse, she would inherit – and the right of a spouse to inherit is so significant that he or she is entitled to a “preferential share”4 of the estate and a portion of whatever remains.5
We do not know why Arthur and Linda chose to not marry, but that was their choice and there are legal consequences that flow from that choice. One consequence is that neither partner has the right to inherit the other’s estate on an intestacy – only through a Will. Another consequence is that Linda could not treat Arthur’s death as a form of separation and choose to take what she would be entitled to under the “equalization of net family property” formula set out in Ontario’s Family Law Act.  The sad consequence for Linda is that she had neither a right to inherit nor the choice to regard Arthur’s death as a separation.6

There was a further complication. Nathan Brandon Patterson (“Nathan”) was Arthur’s biological son.  In the ordinary course he would have been entitled to the entirety of the estate as Arthur was unmarried and had no other children.  However there was a wrinkle; Nathan had become a “Crown Ward”7 when he was a minor.  In Ontario, when a child is given up for adoption there is a termination of that child’s entitlement to his/her birth parent’s estate should that biological parent die intestate.  In this case, Linda argued that Nathan lost his right to inherit as an “intestate heir” by virtue of the fact he was a Ward of the Crown. Nathan took the position that a Crown wardship is not the same as an adoption. Should the dispute not settle out of court, this point of law will have to be decided by a Superior Court judge.

(2) Who should administer Arthur’s estate?

As discussed above, Linda will not be going to inherit anything from Arthur’s estate.  Linda was a common law spouse and thus she had no right of inheritance.8 To see any money from Arthur’s estate Linda would have to sue as a dependant under Part V of the Act.9 Nathan’s entitlement in Arthur’s estate is in question, but it may be that he has no right to inherit either. Before the assets of the estate can be distributed, the claims of both Linda and Nathan will have to be determined.

In a motion brought in relation to the administration of Arthur’s estate, Linda  argued that both she and Nathan had a disqualifying conflict of interest which precluded them from being appointed as the Estate Trustee of the estate in any of the following types of appointment:

An Estate Trustee Without a Will: where there is no Will, someone has to apply to the court to be named an estate trustee without a Will. However, here, it’s unclear whether either Linda or Nathan has any interest in Arthur’s estate;10

A litigation administrator:11 since there was no Estate Trustee yet appointed by the court, someone had to defend the estate’s interest in the pending litigation brought by Nathan. If both Linda and Nathan had a cause of action against the estate it would be impossible for either to defend the estate against themselves; or

An Estate Trustee During Litigation 12 (ETDL): where parties dispute who should be the proper estate trustee or where those with interests in the estate are involved in litigation with the estate, it is still necessary for someone to administer the estate until the dispute is resolved. That is to say, someone has to ensure that the assets are collected and preserved, taxes are addressed, and creditors are paid.  The ETDL is a neutral person (often a lawyer, or an accountant, or a trust company) can administer the estate without being drawn into the fight. Indeed, an ETDL can help the parties end the dispute in mediation or litigation by collecting and providing relevant information and documents (for example, a statement of estate assets)13

Who then should administer the estate?

In paragraphs 9, 10 and 21 of his decision, Justice Daley noted:

“[w]hether the respondent’s former status as a Crown Ward has disentitled him to an interest in the deceased’s estate as a beneficiary, in spite of his biological connection to the deceased, is a matter that must be considered at a later point in time…..Without deciding this question, the law presented on behalf of the respondent seems to conclude that Crown Wardship orders do not terminate a parental relationship and it is only an adoption order that terminates that relationship: Jewish Family and Child Services v. K. (S.), 2015 ONCJ 605, at para 12.

Thus, as the respondent is acknowledged to be the biological son of the deceased and subject to a later determination as to the effect of his Crown Wardship, he presumptively would be first entitled to act as Litigation Administrator without the need to have an independent arm’s-length person appointed to that role.

At the end of the day, the judge decided to appoint a neutral party as ETDL because given that Linda and Nathan each were pressing claims against the estate – having either administer the estate in suchcircumstances would inevitably pose problems. A neutral party could do the same job while the litigation carried on to its conclusion. At that point, if the estate still was under administration, Linda or Nathan might well become entitled to take over administration of Arthur’s estate.

Conclusions and Takeaways

In a lot of people’s minds, making a Will with a lawyer is an unnecessary expense because “the family will just sort things out”. Would that were always the case. In Arthur’s case, it would have been helpful for him to have made a Will given that the claims by Linda and Nathan could have been anticipated and managed. It would have been cheaper for everyone (by far) if Arthur had resolved these questions in his Will.

Second, there is a huge practical difference where a person dies survived by a life partner that he or she is married to as opposed to living in a cohabitational relationship – not better, just different. The failure to deal with the entitlements of Linda (if any) in Arthur’s estate lead to litigation that may well have been avoided.

For the lawyers reading McQuoid v. Patterson, it is imperative that you are familiar with the differing roles of an ETDL, litigation administrator, and estate trustee without a will.  Where there is litigation involving the estate, the estate must be represented if it is to be bound by the judgement or settlement that terminates the dispute; however, these different types of appointments differ in cost and effectiveness.

As always, we would be happy to offer solutions to problems that arise with respect to Wills and estates.

Footnotes
  1.   2020 ONSC 7680
     
  2.   That means that the deceased passed away without a will either because the will he had was invalid or he never made a will.
     
  3.   In such cases, common law partners may bring a court action for “unjust enrichment” based on the existence of a “joint family venture”; see Kerr v. Baranow, 2011 SCC 10 (S.C.C.).
     
  4.   See Succession Law Reform Act  ONTARIO REGULATION 54/95.
     For the purpose of section 45 of the Act, the amount of the preferential share is prescribed as,
    (a)  $200,000, for the estates of persons who die before March 1, 2021; and
    (b)  $350,000, for the estates of persons who die on or after March 1, 2021
     
  5.   In summary:
    – Intestacy where spouse and no issue – Spouse inherits Property. See section 44.
    – Spouse & 1 Child – Spouse receives the preferential share and 50% of excess. Child receives 50% of excess.
    – Spouse & more than 1 Child. Spouse receives preferential share and ⅓ of excess.  Children split ⅔ of excess.
     
  6.   For an interesting analysis of this see Walsh v. Bona 2002 CarswellNS 511, 2002 CarswellNS 512, 2002 SCC 83, 2002 CSC 83, (2002) 4 S.C.R. 325, (2002) S.C.J. No. 84, 102 C.R.R. (2d) 1, 119 A.C.W.S. (3d) 42, 210 N.S.R. (2d) 273, 221 D.L.R. (4th) 1, 297 N.R. 203, 32 R.F.L. (5th) 81, 659 A.P.R. 273, J.E. 2003-102, REJB 2002-36303
     
  7.   A “Crown Ward” is an old term to describe a child put into foster care. Ultimately, such a child is protected by “the Crown” (the government), which owes such children a fiduciary duty to act in their best interests.
     
  8.   To access those provisions Please see Part II of the Succession Law Reform Act.For a review of Ontario’s law regarding what happens when someone dies without a will see our blog “Law of Intestacy in Ontario”The Law of Intestacy in Ontario – Wagner Sidlofsky LLP
     
  9.   It is beyond the scope of this blog to fully describe the law of dependants relief.  For more details I refer the reader to Dependant’s Support Cheat Sheet – A Primer – Wagner.
     
  10.   See Rule 75.05
     
  11.   The litigation administrator represents the Estate pursuant to Rule 9.02, of the Rules of Civil Procedure, when the estate has no executor or administrator.
     
  12.   See Rule 74 which defines the ETDL to mean “…an administrator appointed pending an action;”  For further information about an ETDL we invite the reader to see
    Appointing an ETDL without a will challenge – Wagner 
    – Distribution of Estate by an Estate Trustee During Litigation and
    A case comment on Mayer v. Rubin1 Charles B. – Wagner
     
  13.   See Justin de Vries blog entitled, “Estate Trustee During Litigation” https://devrieslitigation.com/estate-litigation/estate-trustee-during-litigation/#:~:text=The%20role%20of%20an%20ETDL,until%20the%20litigation%20is%20concluded.
     
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This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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