A recent decision by the Ontario Superior Court in Fletcher and Vansickle v. Vansickle draws attention to the importance of careful drafting of your will if you plan to give your beneficiaries the Option to Purchase a part of or all of your business upon your passing.
What is an Option to Purchase?
An option to purchase in a will grants a beneficiary the option to purchase a specific asset of the deceased. If the beneficiary chooses to not exercise the option, the asset usually becomes part of the residue of the estate.
An option to purchase is frequently used to acknowledge and compensate a beneficiary’s contribution to a business. Or to keep a family business in the family rather than risk it being made part of the residue where it would like to be sold off to distribute the monetary value to the beneficiaries.
In the case a hand, the Estate Trustee applied to the court for assistance with interpreting a provision of the will that granted one beneficiary an Option to Purchase the testator’s farm business. The original will was one of a pair of mirror wills drafted for Mrs. Dorothy Ethel Vansickle and her spouse Thomas Bert Vansickle.
What Are Mirror Wills
Mirror wills are defined as “wills that are executed by two individuals that contain nearly identical provisions”. These are typically used by couples, and each spouse will essentially “mirror” the will of the other spouse. Though these types of wills may “mirror” each other at the outset, it should be noted that either spouse is in full control of his or her will, and can alter the contents of his or her will without requiring any input from the other spouse.
Mirror wills are also sometimes used by business partners to ensure that control of a business goes to the other partner rather than an estate.
In the case of Fletcher and Vansickle v. Vansickle, the spouses had executed mirror wills in 1985. Neither spouse had updated their wills since they were executed. Mr. Vansickle passed away in 1994, and Mrs. Vansickle passed away in 2019. The couple had seven children, of which six survived Mrs. Vansickle.
At the time that the mirror wills were drafted, the couple owned and operated a farm of approximately sixty acres as a side business in addition to their regular employment in the public school system. One of the couple’s children, Howard, helped run the farm. The others did not show similar interest.
Upon the passing of Mr. Vansickle, Howard began to rent a part of his parents’ acreage to run his own small farm operation. The farm operation did not include his mother. Howard continued to rent part of the acreage until his mother’s passing.
When Can an Executor Ask a Court to Interpret a Will Provision?
Under the Trustee Act of Ontario, an Executor, also referred to as an Estate Trustee, can apply to the court for “the opinion, advice or direction of the court on any question respecting the management or administration of the trust property”.
This gives broad protection to the Trustee, for as long as the Trustee follows the “opinion, advice, or direction” of the court, the Trustee is deemed to have discharged his or her duty as a trustee, and the Trustee is indemnified when “acting as advised”.
In the case of Fletcher and Vansickle v. Vansickle, the Estate Trustee applied to the court for assistance in interpreting the Option to Purchase provision that appeared in the 1985 mirror wills of both Mr. and Mrs. Vansickle.
The Option to Purchase was contained in clause Clause 3(c)(ii) of the Will. That clause granted Howard the option to purchase “the farm business carried on by [Mrs. Vansickle]” within one year of Mrs. Vansickle’s passing for the sum of $85,300 “or such lower price” as may be reasonably established by the Trustee. There was no similar provision allowing for the price to be set higher.
The value of 65 acres of land in Ontario had cleared increased in the span of the 34 years since the will was originally drafted and Howard’s siblings, were hesitant to allow Howard to purchase the family land for a sum that turned out to be a fraction of the land’s modern value. Howard took the position that renting part of the acreage and operating a farm on that land satisfied the language of Clause 3(c)(ii) of his mother’s will.
Principles of Will Interpretation
In interpreting Clause 3(c)(ii), the Ontario Superior Court of Justice turned to the Principles of Will Interpretation confirmed by the Ontario Court of Appeal in an earlier 2021 decision in Ross v. Canada Trust Company, and confirmed that the Armchair Rule that we recently wrote about in another blog post provides the overarching framework for will interpretation. The armchair rule essentially requires the court to “put itself in the position of the Testator at the point when he or she made his or her will, and, from that vantage point, reads the will, and construes it, in the light of the surrounding facts and circumstances”.
Applying the armchair rule to the circumstances at hand, Justice D.A. Broad confirmed that the current value of the land and the current rental values for similar land are not relevant or useful for assistance in interpreting the intentions of the Testator at the time the will was drafted.
Justice D.A. Broad found that what was relevant was the testator’s intention to allow Howard to purchase the farm business that she had operated with her late spouse and that she intended for the “continuance of the farm operation while treating all of the children fairly, not by means of an outright gift of the farm operation to Howard, but by the granting to him of an option to purchase it for valuable consideration from the Estate”. Since she “did not “carry on” “the farming business” (that is, the active farming business formerly operated by her and her husband) on the date of her death, no option to purchase may be exercised by Howard”.
Justice D.A. Broad’s decision resulted in the farmland being made part of the residue of the estate and will be split in accordance with the other provisions of the will between the six surviving children.
Wills Should be Regularly Reviewed for Currency
As this decision demonstrates, individuals should review their wills regularly to ensure that not only is the language use reflective of their intentions and wishes but also that the dollar values assigned to various properties, real estate or otherwise, are reflective of current prices. Had the will been updated to include a current value for the farm property, it is likely that the estate would have been settled without an expensive application to the court and without involving the siblings in a contentious situation.
Contact Toronto Estate Lawyers at Derfel Estate Law for Estate Administration
At Derfel Estate Law, our experienced team of Estate Lawyers are always up to date on estate administration requirements and can assist in acting as an Estate Trustee. Contact us by phone at 416-847-3580 or reach us online to discuss your estate needs.