There is a lot that estate trustees must balance when administering an estate through the probate process. They need to pay attention to the beneficiaries, paying any debts of the deceased, probating the Will, and keeping up with tax obligations. Something else that trustees should keep in mind, particularly when it comes to timing, is the Rule of Convenience.
What is the “Rule of Convenience”?
The rule is a principle of common law, which states that where a Will does not specify a time for carrying out a legacy under the Will, the payment should carry interest if it has not been paid by the one-year anniversary of the testator’s death. Therefore, if no specific timing is specified, testators need to ensure that they have distributed the estate to the beneficiaries within one year of the death, or the estate will be liable for interest on top of the inheritance itself.
Significant Interest Owed to Beneficiaries, Despite Beneficiaries Causing Delay in Part
A father with three surviving children, a son and two daughters, had drafted a Will that allowed for a relatively even distribution of his assets among them. A number of years later, the father drafted a new Will. In this one, he left each daughter a legacy of $530,000, and then the residue, which was considerably more than the two legacies, to his son. The son was also named as the executor of the estate.
After the father’s death, the daughters challenged the last Will, claiming their father had been unduly influenced by their brother. They were ultimately unsuccessful in their challenge, and the litigation delayed the payment of their legacies. Despite their role in the delay, the sisters then brought a claim for interest on their legacies, citing the rule of convenience. The interest payments they claimed would come from the residue of the estate, reducing the amount the brother ultimately received.
The lower court found in favour of the brother, citing the sisters’ role in delaying the payment of their legacies due to the Will challenge. however, when the sisters appealed the decision, the Court of Appeal overturned the lower decision and found in their favour.
Finding Any Other Way Would Discourage Litigation Going Forward
The Court of Appeal reiterated the importance of upholding the principle of the Rule of Convenience. Even though the sisters’ litigation had been the primary cause of the delay, it would be unfair to cite this as a reason not to grant them the interest they were entitled to. The Rule had been invoked in order to promote predictability and certainty in the distribution of an estate. If the sisters were denied their right to interest, it would have a chilling effect on future estate litigation, whether the action had merit or not.
In the end, the Court of Appeal awarded the sisters each 10% interest on their legacy, resulting in an interest award in the amount of $53,000 for each sister, which came out of the brother’s entitlement to the residue.
Estate trustees should keep this decision in mind when planning the administration of an estate, as an interest award can be significant and can massively affect an estate’s bottom line. On the other hand, courts should be wary of meritless claims made simply to create a delay, thereby ensuring beneficiaries of an extra entitlement to the estate.
At Baker & Company, our Toronto estate planning lawyers can help testators through the probate and estate administration process, ensuring that deadlines are met and all obligations are fulfilled. We have extensive experience in guiding estate trustees through this process and representing them in litigation should that become necessary. Call us at 416-777-0100 or contact us online for a consultation.
