This case is a great example of how family law and estates law often overlap with one another

In D’Onofrio v. Riley, the Ontario Superior Court of Justice was tasked with determining several issues brought forward by an Estate Trustee who claimed that the Estate she managed had liabilities far exceeding the available assets. This case touched on intersecting family law issues as the Deceased left behind minor beneficiaries and had an executed separation agreement with his former spouse at the time of his death which impacted his estate plans.

 By way of background, the Deceased died in a tragic automobile accident at the age of 43. He executed a will two years prior that was not drafted by a lawyer. The Deceased was survived by his common law spouse, Shannon D’Onofrio (“Shannon”) whom he named as Estate Trustee in his will, their daughter, Skyler, his former spouse, Rebecca Riley (“Rebecca”) and their children, Liam and Cooper.

At the time of his death, the Deceased had:

• One jointly owned property with Shannon which passed by right of survivorship;
• His former matrimonial home which he co-owned with Rebeca as tenants-in-common;
• Three life insurance policies with a total death benefit value of $1,460,000.00 (each policy had one or more designated beneficiaries but none of whom were the Estate); and
• Financial interests in several corporations (none of the corporations responded to Shannon’s application).

Shannon’s application focused on three key issues:

1. Whether the Deceased held an interest in a residential property (the “Concession Road” property) and whether the value of the property was eligible for creditors of the Estate;
2. Whether the insurance policy trust described in the will was binding; and
3. Whether she could make an assignment of the Estate into bankruptcy.

With respect to the first issue, the Court found that Rebecca was the beneficial owner of the Concession Road property. When the Deceased and Rebecca separated they executed a Separation Agreement which provided that the Concession Road property (the matrimonial home) remain with Rebecca as part of the terms of their separation –this was meant to be in lieu of spousal support. Despite the Agreement terms, title to the Concession Road property was never transferred into Rebecca’s name alone.

The court found that when there is a valid agreement to transfer property, the transferee becomes the beneficial owner of the property. If the transferor holds legal title, the transferor holds title to the property in trust for the transferee pursuant to the agreement to transfer the property. In other words, Rebecca became the beneficial owner of the entire interest in the Concession Road Property upon execution of the Separation Agreement. The Concession Road Property was also gifted to Rebecca in the Deceased’s will. As a consequence, the court found the Concession Road Property did not form part of the Estate and was therefore not eligible for creditors of the Estate.

Turning to the next issue, in the Deceased’s will he had requested that $100,000.00 from any life insurance death benefit be paid directly into a trust for his two sons. The residue of the Estate was to be paid to Shannon. However, all of the life insurance policies he owned had a designated beneficiary which was not the Estate.

The Court found that the language used in the will regarding the insurance policy proceeds was precatory. In his will, the Deceased used the word “request” when he referred to the insurance policy proceeds, which term the court asserted was not an imperative. In contract, in the first two paragraphs of his will the Deceased used the word “give” both in reference to the Concession Road property and the matrimonial home co-owned with Shannon. On this issue, the Court found that the insurance policy trust described in the will did not create a legally binding trust.

Finally, the Court declined to grant Shannon leave to make an assignment of the Estate into bankruptcy citing the fact that she did not meet her onus to show the Estate was insolvent. Shannon claimed that the estate assets were worth $15,000.00 and the liabilities amounted to over $462,000.00, with additional liabilities over $219,000.00 related to private companies in which the Deceased had a financial interests.

The Court’s refusal to grant Shannon leave was based on the fact that there was no evidence as to the Deceased’s precise interest in each of the private companies. For example, it was unclear whether the Deceased was a shareholder or investor in the private companies, and the nature of the business carried on by the companies in general was further left unclarified. Ultimately the Court found that the evidence provided by Shannon was insufficient and did not establish that the estate’s liabilities exceeded its assets.

This case is a great example of how family law and estates law often overlap with one another and the importance of clarity and consistency across executed agreements and testamentary documents!