Property rights are fundamental in providing security and the prospect of wealth and play an important role in estate planning. In today’s blog post, we will discuss the case of Di Michele v Di Michele, [2014] ONCA 261 and highlight the powers of estate trustees in impacting beneficiary interests.

Who is an estate trustee?

An estate trustee is a person who deals with a deceased’s estate after death. They may be appointed explicitly in a will or by the court where there was no will. Estate trustees essentially manage the deceased’s property and distribute the assets according to the deceased’s wishes.

Facts of Di Michele v Di Michele

In this case, through her will, the testator devised her property to be equally distributed among her children: Roberto, Michele, and Antonio. She also appointed Antonio as the estate trustee to administer the property. However, Antonio had his plans and put the property up as security in favour of mortgagees. Eventually, the mortgagees obtained a judgment of $1.5 million against Antonio and wanted to have the property sold.

Trial Court’s decision

At the trial court, the judge relied on s. 9 of the Estates Administration Act to hold that the property vested in the brothers three years after the testator’s death. For better understanding, the section provides:

‘Real property not distributed among the persons beneficially entitled thereto within three years after the death of the deceased is thenceforth vested in the persons beneficially entitled thereto under the will.’

The trial judge also held that the mortgage could only be enforced against Antonio’s 1/3 share since the vesting occurred after the mortgage.

Appeal Court’s decision

The decision was adverse for the other two brothers on appeal. Firstly, the court confirmed that Antonio was indeed vested with the real and personal property of the testator under Section 2(1) Estates Administration Act and could validly obtain a mortgage.

Secondly, although the mortgagee was aware that Antonio held the property in the capacity of “Trustee with a will,” it imposed no notice of trust on them under Section 62(2) Land Titles Act.

Finally, the court held that although Antonio may have breached his duty as an estate trustee to his brothers, the mortgage was validly created. The court then dealt its final blow by holding that the mortgage was binding on the whole property, not just Antonio’s 1/3 share.

It is important to note that in arriving at its decision, the court stated:

“Further, s. 62(2) provides that the owner may deal with the land as if the description as a trustee had not been inserted. This is subject to the registration of any caution or inhibition. However, in the present case, no caution or inhibition had been registered on the title to the property.”

In conclusion, while it is legitimate to trust that an estate trustee would act in your best interest as a beneficiary, it is still prudent to register your interest as provided for under s.71(1) Land Titles Act.

At Northview Law, we would love to discuss any real estate concerns you may have. You can book a free consultation with Northview Law by following this link or contact us at 416-639-7639. We look forward to hearing from you soon.