As the will included conflicting wording, the executor sought the court’s direction as to who should receive the estate.useng/iStockPhoto / Getty Images
The estate of a woman who outlived her beneficiary, executor and alternate executor is to be divided equally between the estates of her five sisters – four of whom also predeceased her.
The woman, who died in 2016 at the age of 91, had named her daughter the sole beneficiary in a will she made 19 years before her death. However, her daughter predeceased her.
As the will included conflicting wording, the executor of Frieda Holzgethan’s estate sought the court’s direction as to who should receive the estate: the estate of all five of her sisters, or the estate of the one sister, Hilda Oswald, who outlived Frieda. (Hilda passed away four years later.)
The Ontario Superior Court of Justice released its decision in Pierce v Oswald on Sept. 19.
Frieda had made her will in 1997 following the death of her husband. In the will, she named Magrid, her daughter, as both executor and sole beneficiary. Should Magrid predecease her mother, the will named Frieda’s lawyer as the alternate executor.
Unfortunately, the lawyer also died before Frieda.
A family friend of Magrid’s and Frieda’s, Mary Pierce, agreed to serve as Frieda’s executor after each of Frieda’s 10 nieces and nephews, who live in Austria, declined the role and accepted the family friend’s appointment. The executor became the estate trustee in 2021.
Per stirpes vs. per capita distribution
Frieda’s will included a distribution clause indicating that if Magrid died before her, the estate should be divided into equal shares “per stirpes,” with one share to be distributed to each of Frieda’s five sisters. (Magrid did not have children.)
Under a “per stirpes” distribution, each individual in a class of beneficiaries receives a share of the estate, with the heirs of any predeceased person in that class inheriting that individual’s share.
In contrast, under a “per capita” distribution, only individuals in the class who are still alive at the time the testator (the person who makes a will) dies receive a share of the estate.
Through an Austrian lawyer, one of Hilda’s children sent letters arguing that, as Hilda was Frieda’s only surviving sister at the time of Frieda’s death, Hilda – and thus her children – should receive all of Frieda’s estate. Under this interpretation of the will, the children of Frieda’s sisters who died before Frieda would receive nothing.
Help from the court
After receiving the letters, the executor applied to the court for direction on how to distribute the estate. None of Frieda’s nephews or nieces, including the one who sent the letters, engaged Canadian legal counsel or otherwise appeared before the court in the application.
The court agreed with the executor that the relevant distribution clause in the will could be interpreted in different ways.
While the clause indicated that the estate should be divided per stirpes, it also identified each sister by name and said that a share should be given to each “for their own respective uses absolutely.”
The judge in the decision said that the wording “could be interpreted to mean, but without expressly stating, a per capita, first-generation distribution, providing each sister with a share in the residue [of the estate] only for the surviving sister(s) and not for their family branch.”
Determining the deceased’s intentions
Analyzing the entirety of the will, the judge determined that Frieda intended to benefit her five sisters equally, including the family branches of any sister who predeceased her.
The judge stated that, despite the conflicting terms used in the distribution clause, Frieda’s use of the term “per stirpes” – and the absence of any express contrary wording in the will – demonstrated she intended entitlements to pass to the next generation should her sisters die before her.
The will also contained provisions as to how an entitlement to a minor beneficiary should be managed, the judge noted. The inclusion of those provisions implied that Frieda had contemplated her estate passing to the children of her sisters.
“These provisions would be unnecessary and would have no meaning or effect if Frieda intended to confer an interest in the residue [of her estate] to her sisters per capita,” the judge said. “None of the sisters were minors at the time that the will was made.”
Finally, the judge said that an “anti-lapse” provision in Ontario estate law, which saves gifts to certain predeceased family-member beneficiaries who have a spouse or direct descendants, would have led to the same distribution even if the judge determined that the gifts to the predeceased sisters had lapsed.
As all the spouses of the five sisters died before Frieda, Frieda’s estate would have passed to the sisters’ children in the same manner under the anti-lapse provision.
When to update a will
Demetre Vasilounis, a partner with Aird & Berlis LLP in Toronto, recommends people review their wills every three to five years, or when a major life event occurs, such as a birth, marriage or death.
“As people are living longer, it further underscores the need to review your estate and incapacity planning consistently,” Mr. Vasilounis says.
Diane Vieira, a partner with de Vries Litigation LLP in Toronto, shares the same sentiment.
In Pierce v Oswald, the fact that both the executor and the alternate executor named in the will passed away before the testator likely contributed to the lengthy period of time – five years – it took to appoint someone to administer the estate, she says.
Mr. Vasilounis says Frieda might have considered appointing a corporate trustee to be her executor following the death of her daughter and lawyer.
A corporate trustee would have the expertise to manage the complexities of a will with foreign beneficiaries. However, a testator would have had to balance the benefits of naming a corporate trustee against potential costs.
Ms. Viera says the executor in Pierce v Oswald was wise to ask the court for direction on a distribution that had been disputed by an interested party and could have been contested.
“As an executor, you could be liable for distributing the estate incorrectly, and that can be very complicated,” she says. With the decision in Pierce v Oswald, “[the executor] is completely protected because now she has a court order directing her on how to distribute the estate.”