Rule Of Convenience May Be Inconvenient For Estate Trustees Or Estates

Often a Will allows significant discretion to an estate trustee to make decisions both with respect to calling in the estate's assets or converting those assets to pay bequests and legacies. However, even where an estate trustee has discretion, s/he must still act in a timely manner to discharge her or his obligations. If the estate trustee does not act in a timely manner to pay legacies, interest may be owed on those legacies either by the estate or, in some cases, by the estate trustee, personally. The obligation to pay interest, known as the "rule of convenience" was recently upheld by the Ontario Court of Appeal.

In the case, the testator had significant assets. Originally, he contemplated dividing them equally between his two daughters and son. However, his latest will dictated that each of his daughters would receive a legacy of $530,000 with the remainder of the estate (the residue) all going to the son. The daughters unsuccessfully challenged the will. After the will was upheld, the daughters again challenged the administration of the estate, claiming that they were owed interest on their legacies because the money had not been disbursed within a year of the testator's death.

The application judge dismissed the application but the daughters appealed successfully. In overturning the decision and allowing the daughters to receive interest, the court observed that the "rule of convenience" allows interest to be paid on legacies if payment of the legacy is delayed by more than a year. There is still a presumption that estates will be wrapped up within a year of the decease (the executor's year). The "rule of convenience" applies if the will is silent as to when the legacy should be paid. It is to ensure that the beneficiary enjoys the earning potential that s/he would receive if s/he had received the legacy in a timely manner. Under the rule of convenience, interest is payable even if payment during the executor's year is impractical or impossible.

The Court of Appeal noted that in certain cases, if the estate trustee has improperly withheld the payment, the interest payment may be owed by the estate trustee and not the estate.

The Lesson: If acting as an estate trustee do not waste time realizing the estate's assets to ascertain whether legacies can be paid. Similarly, do not delay in paying legacies. Failure to do so could result in claims by the beneficiaries for interest owed by the estate, or in certain cases, by the estate trustee.

Rivard v Morris, 2018 ONCA 181 (ONCA) https://www.canlii.org/en/on/onca/doc/2018/2018onca181/2018onca181.html?resultIndex=1

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