Will disputes can be extremely emotional and overwhelming for the parties involved. Disputes sometimes result from wills that are difficult to interpret, which may be the case where there is ambiguity in the language of the will or in the intentions of the person making it (the testator).
One area of difficulty is distinguishing between a life estate and a licence, which are tools used by testators to provide access to real property (land) for a beneficiary. This article takes a look at the difference between the two, along with a recent decision of the Court of Appeal for Ontario in which a beneficiary claimed that a will gave him an unconditional life estate.
A life estate (or life interest) is a right to possession of a property for the duration of the beneficiary’s life. This allows the life tenant to use the property during their life, after which ownership passes to someone else designated by the will.
They are sometimes used to provide housing for the testator’s spouse from a second marriage, with ownership of the house later passing to the testator’s children.
A licence, with respect to real property, is a privilege to go on the premises for a certain purpose but does not operate to confer on the licence holder (licencee) any title or estate in the property.
The distinction between life estate and licence can be significant for a range of reasons. Life tenants have the right to immediate possession of the property and to its use as the owner, subject to some restrictions to protect the rights of the person entitled to the property at the end of the life estate. They are ordinarily responsible for expenses and routine maintenance, and they may be entitled to any income generated by the property (for example, if it is leased).
Licencees have a right to use the premises for the purpose stated by the testator and are subject to any stated conditions.
In Barsoski Estate v Wesley, the testator’s will instructed her estate trustee to hold her London home and contents “as a home” for her long-term friend (but not romantic partner) during his lifetime “or for such shorter period as he desires”. The will continued:
Upon the earlier of [him] advising my Trustees that he no longer wishes to live in the House, [him] no longer living in the house, and [his] death, the House shall be sold and the proceeds shall be delivered to St. Stephen’s Community House to be used by the highest priority needs as determined by the board of directors.
The will also provided an amount of money to be used for the maintenance of the home and, in the event that he was no longer able or wishing to live in the house, to be used for his living expenses, nursing or retirement home expenses.
After the testator’s death, St. Stephen’s Community House hired an investigator who determined that the beneficiary worked full-time in Toronto while an acquaintance of his lived in the home. The beneficiary claimed that the London home was his primary residence and that he lived there on weekends once or twice a month.
The estate trustee brought an application as a neutral party for the court’s direction.
Justice Tranquilli looked at the language of wills in previous cases and noted that there was “no overarching principle” as to whether specific terms create a life estate or a licence. A court should consider the words used in light of the surrounding circumstances, consider other admissible evidence and give the words placed in a will the meaning intended by the particular testator.
Her Honour decided that the will gave the beneficiary a licence to occupy the house as opposed to a life interest, stating that it was a grant of an interest to a friend, not a spouse, which distinguished it from many of the decisions that he relied on.
Her Honour also held that the condition was void for uncertainty because it was impossible to determine what it meant to “live” in the house. As a result, the licence failed and the estate trustee was required to sell the house and pay St. Stephen’s. The beneficiary appealed.
Justice of Appeal Harvison Young, emphasizing the importance of the contextual factors when determining whether gifts grant licences or life interests, noted that the beneficiary and testator “were very close friends who regarded each other as family”. Her Honour decided that the will conferred a life interest. It didn’t matter that he wasn’t her spouse, and there was “no reason not to give effect to her choice in this regard”:
Treating this will differently than it would have been treated had the testator and appellant been romantic partners, spouses or children violates that principle unnecessarily by failing to give effect to the context as the testator saw it.
Justice of Appeal Harvison Young agreed with the trial judge that the condition was void for uncertainty. If a subsequent condition contained in a grant of a life interest is found to be void for uncertainty, the gift is effective without the limiting conditions. As a result, the Court of Appeal decided that the beneficiary had a life interest, free of any condition.
If you are an executor or estate trustee, the experienced estate lawyers at NULaw can carry out a thorough review of the will, help you understand your duties and obligations, and mitigate any risks, particularly if there is a dispute over the interpretation of the will. We also help beneficiaries with will disputes.
NULaw and its predecessors have been helping clients in Toronto since 1953. We have extensive knowledge of estate and trusts law matters and regularly provide honest and practical legal advice on these matters, including estate planning, estate administration and wills. We also represent clients in all types of estate litigation, including will disputes, challenges and interpretation. Contact us online or at 416-481-5604 to book a consultation.