When people pass away, they may leave financial debts that still have to be paid out of their estate. Of course, not every debt is to be treated the same way. In a recent case heard by the Court of Appeal for Ontario, the appellant’s father passed away, leaving behind both a line of credit as well as savings. The court had to determine where the money to repay the loan would come from.
The deceased had two children. The mother of the children passed away, though the father remarried. Following his second marriage he began to spend less time with his children. The second marriage occurred when he was 77 years old. After the second marriage he transferred ownership of his home to he and his wife as joint tenants (the home was originally owned by him alone). He also executed a will which named his wife as the estate trustee. He divided the residue of his estate into three parts, to be divided among his three children and his wife (the children would each receive 30%, while the wife would receive 40%).
The man died on March 6, 2017. The home passed to his wife by right of survivorship. After paying most of the debts of the estate, there remained an investment account with about $80,000 in in. However, there was also a line of credit taken out prior to his second marriage. The deceased had owed $50,000 against the line of credit.
The line of credit
The appellant, one of the deceased’s children, contended the debt as secured against the matrimonial home, and therefore was not a liability that should be attributed to the estate. The wife, meanwhile, took the position that the loan was unsecured, and that its repayment should come from the $80,000 left in the investment account.
A motion judge found that the estate was liable for the loan.
The court noted that the motion judge’s conclusion that the deceased was solely responsible for the debt, leaving the estate liable, was a finding of fact and could only be reviewed on the standard of a palpable and overriding error. The court went on to explain that it could find no such error.
The loan had been taken out before the deceased married his second wife. Laws including the Land Transfer Tax Act, the Mortgages Act, and the Execution Act do not support the notion of the wife becoming liable for the debt simply because she became the owner of the matrimonial home. This left the court with no basis on which to interfere with the motion judge’s finding.
The appellant also argued that the judge was biased against her because she was a self-represented litigant. The court found no evidence of to break the presumption of the judge’s impartiality.
The court denied the appeal and awarded the wife costs in the amount of $9,000.
If you are the friend or family member of a testator and are concerned about the actions of an appointed trustee or executor, contact Derfel Estate Law. Our Toronto estates lawyers help clients ensure that their interests or the interests of their loved ones are protected, and decisions are being made in the best interests of the estate. Call us at 416-847-3580 or contact us online to schedule a consultation.