Wills & Estates
Trevor Todd
Judith Milliken QC
Life Estates
L
ife estates, also known as
life interests, are a wellestablished part of estate
planning.
The owner of a life estate (the life
tenant) has the right to occupy, use,
and deal with real and/or personal
property for his or her lifetime. When
the life tenant dies, the remaining
interest in the property then passes
to the next person entitled, historically
named the remainderman. The interest
remaining after the death of the life
tenant is called the remainder interest.
After the death of the life tenant, the
remainderman enjoys full ownership
of the property.
Historically, men of means, by
their Wills, left their wives life estates
in their property. The widow could use
the matrimonial home and investments
for her life. When she died, those
assets would then typically pass
to their children.
In modern times, life estates are
often used by testators in second
marriages. They are used to provide
security, both to the second husband
or wife and to ensure the ultimate
inheritance of the property by the
testator’s own children. A life interest
is provided to the second spouse,
with the remainder interest in the
property passing to children, after
that spouse’s death.
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Life estates, such as a
discretionary trust for life, may also
be used to provide financial security
for disabled children, spendthrift
children, or drug- and/or alcoholaddicted children. Because the child
never has complete control of the
principal, he or she cannot dissipate
the assets.
In modern times, life estates
are often used by testators
in second marriages.
During his or her lifetime, a life
tenant enjoys the right to possession
and management of the property. This
includes the right to earn rent from the
property.
The various obligations of the
owners are apportioned between the
life tenant and the ultimate owner, the
remainderman. For example, the life
tenant will be responsible for paying
the property taxes and the interest
on any mortgage. The remainderman
will be responsible for insuring the
property and repaying the mortgage
principal.
In general terms, a life tenant is
entitled to use the property during
his or her lifetime, but must treat the
property in such a manner that it is
not damaged and does not deteriorate,
beyond reasonable wear and tear.
The Society of Notaries Public of British Columbia
Life estates may be created
• by Will,
• by a trust indenture,
• by land transfer,
• b
y court order, pursuant to section
96 of the Estate Administration
Act, RSBC, which covers
succession on intestacies. It gives
the surviving spouse the right to
use the matrimonial home as a
residence for life.
Case Law Dealing with Life Interests
Created by Will
1.Wilson v. Wilson (1944)
1 W.W.R. 223
In this case, the Will provided
the wife should receive all of the
deceased’s property “for her sole
use and benefit forever.” This was
immediately followed by a direction
that, upon her death, the residue be
equally divided between their children.
The court held that the wife took
only a life interest and the remainder
went to the children. They found that
the use of the word “forever” only
emphasized that during the wife’s
life, she should have the sole use and
benefit of the property.
2.Pellan Estate v. Pellan 1954
Carswell BC 92
The deceased left a homemade Will
that included the following clause:
”I give, devise and bequeath unto my
Volume 17 Number 4 Winter 2008
husband the house at 1115 Princess,
to enjoy as long as he is able and then
sold or given to the old ladies home.”
during her life, and after her death to
pass among our children as she may
think proper to divide and direct.”
The court ruled that “to enjoy as
long as he is able” can mean, at most,
as long as he shall live. Therefore,
the husband received only a mere life
interest.
On an application to interpret the
Will, the court held that the widow
took only a life interest in the property,
with no power to encroach upon the
capital of the estate. Upon her death,
she could give the remaining personal
and real property to such of the
children as she might select.
3.Re. Mulhall Estate (1975)
W.W.D.120
The deceased’s Will gave the whole
of his estate to his wife, so long as
she remained his widow and, in the
event of her remarriage, the estate
was to be wound up and divided in
a specified manner.
The court held it was clear that
the stated intention of the testator
was for the widow to hold the whole
of his estate so long as she remained
a widow, and went on to provide
specific directions as to the vesting
of his estate in the event of her
remarriage. The widow therefore only
received a life interest.
4.Cielien v. Tresidder 1987
Carswell BC 159 BCCA
The testator died after living with
his common law wife and her son for
12 years. He left a stationery-form
Will that provided that his common
law wife was to have the testator’s
real property and all his other assets.
It continued, “However, upon the
sale or disposal of the real estate as
described above, the proceeds shall
be equally divided between her son
and my children.”
The trial judge held that the
meaning of the Will was to give her
only a life interest in property. On
appeal, the court held there were
no words in the Will to support an
intention on the part of the testator
to confer on his wife only a life interest
in the property. On the contrary, he
had intended her to have an absolute
interest in it.
Case Law Dealing with Power
of Encroachment
1.Re. Tomashewsky Estate (1923)
1 D.L.R. 1143
A testator gave all his real and personal
estate “unto my wife, to use it all
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…the court held that the
widow took only a life
interest in the property…
2.B.C. Minister of Finance v. Fraser
(1974) 6 W.W.R. 560
By Will, a testator left his wife “a life
interest in my estate and property.”
The Will provided that the remainder
was to pass to a charitable society.
The estate consisted of both real
property and cash. The issue was
whether the spouse was entitled to
encroach upon the cash during her life.
Since there was no clause in the
Will showing the testator intended his
widow to have a power of encroachment
on the estate capital, the court ruled
she was not allowed to do so.
The court held it was well-settled
law that when the words “life interest”
are used in the Will in relation to
personal property, then the life tenant
may enjoy the income and nothing more.
A testator must expressly or impliedly
indicate an intention to give the life
tenant a power of encroachment.
3.Pask v. Tyler 1977
Carswell BC 293
Here the court was asked to determine
whether the words “during her
lifetime” created an absolute interest,
a life interest, or a life estate with a
power of encroachment.
There was no specific clause in
the Will allowing the wife to encroach
on capital. Nevertheless, the testator
did empower his trustee to convert
his assets into cash and credit and to
invest in any investment which she in
her uncontrolled discretion considered
advisable.
The Scrivener
The court held that the power
to convert and invest, read together
with the other clauses in the Will,
established that the testator’s true
intent was to bequeath a life estate
to his wife with power to encroach
upon the interests of the remainder.
The court reasoned that since the
estate was not large, if the testator
had intended that his wife should only
have the income from the estate, then
he could have easily expressed that
intention.
Disputes over Repairs to the Property
Leaky condominiums have squarely
raised the question of financial
responsibility for costly repairs.
According to Water’s Law of Trusts
in Canada, third edition, at page
1050–51,
the generally followed rule is that
…
the tenant must meet ordinary or
day-to-day repairs out of income,
while repairs to the structure are
the responsibility of the capital.
This makes perfectly good
sense, given the nature of each
successive beneficiaries interest.
Unfortunately, the authorities are
by no means clear… .
The Estate of Lynn Louise
Hawkins, Deceased 2006 BCSC 1374,
involved litigation concerning a leaky
condo and the question of whether a
life tenant should bear the expense of
the significant repairs. In this case,
the repairs amounted to over $71,000.
The strata corporation had made
the repair, then passed the cost along,
as a special levy, to the individual unit
owners. Under protest, the life tenant
who had inherited under an estate
paid this strata council assessment.
She then sought reimbursement from
the estate, arguing that the special
levy was not truly her responsibility
because it did not represent
“maintenance costs and repairs” as
stipulated under the Will.
The court held that the language
of the repair clause under the Will
did not make the special levy a
repair obligation of the life tenant.
Instead, the court found that the levy
represented an expense of a capital
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nature and was thus an obligation
of the estate.
The court referred to a number
of decisions differentiating between
recurring, periodic repairs and those
repairs necessary for the proper
preservation of the building. The cases
held that restoration repairs should be
paid out of capital, whereas recurring
repairs should be paid out of income.
The court recognized that these
general principles are often difficult to
apply, in particular for the trustee who
has a duty to act impartially between
the beneficiaries.
Determining the Value of a Life Estate
There is clearly a significant value
to a virtually mortgage-free home for
life, which is often what a life estate
entails. But what if the person wants
to move? Assessing the value of the
life estate appears relatively simple in
cases where the life tenant continues
to live in the home or collects
rents. Presumably, the value can be
calculated using the monthly rentals
and the life expectancy of the life
tenant and capitalizing the result.
It becomes more complicated,
however, where a life tenant must
sell the property, thus ending the life
estate. Such a situation may arise
where there are insufficient estate
assets to pay the estate debts and
expenses, requiring the property to
be sold. Another example may involve
joint ownership where the life tenant
only owns a one-half interest in the
property and the one owner wishes to
force a sale of the property under the
Partition of Property Act.
The case law is not entirely clear
as to whether, in such circumstances,
the life tenant has a measurable value,
capable of capitalization, and payable
to the life tenant upon the termination
of a life estate. It may depend on
whether a person is dealing with
historic common law rights or statutory
rights on intestacy accorded by the
Estate Administration Act.
In Aho v. Kelly 57 BCLR (3d)
369, the court dealt with the situation
involving the settlement of previous
estate proceedings between a
stepmother and two stepchildren.
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The settlement involved registering
the title to the matrimonial home in
all three names as equal tenants in
common. It also included, however,
the formal registration on title of a life
estate in the stepmother’s name.
The stepmother maintained that
she enjoyed a common law life estate
in the lands and that her interest had
a value capable of capitalization. She
argued that the value of her interest
was significantly higher than a onethird interest in the proceeds of sale.
The court noted that it should
be extremely cautious in ordering the
sale of lands subject to a life estate
without the consent of the life tenant.
In this case, the court found it had
jurisdiction to order a sale because
the stepmother did in fact consent.
The husband had died
intestate…
The court found the widow’s life
interest did have a value capable
of capitalization. It further found
that upon partition and sale, this
value should be paid from the sale
proceeds to the widow in priority to
the remaindermen stepchildren.
The court determined the value
of the life estate based on the
widow’s having a life expectancy of
a further 18.7 years. This yielded
a value entitling her to receive 76
percent of the proceeds upon sale,
in priority to the two stepchildren
who shared the balance.
A very different conclusion was
reached in Khan v. Khan 2004 BCSC
186. This case also dealt with the
issue of the capitalized value of a life
estate given upon intestacy. In this
case, however, it was dealing with a
life interest given under the terms of
the Estate Administration Act.
In Khan, the deceased husband
had owned 50 percent of the house
as a tenant in common with his
mother. The house consisted of two
self-contained units with related
families living in either unit.
The husband had died intestate,
thus his widow inherited a life estate
The Society of Notaries Public of British Columbia
under the provisions of the Estate
Administration Act. The widow sought
a court order for partition and sale
of the house and a direction that she
was entitled to the balance of the
sale proceeds after the mortgage was
discharged (she was only 38 years
old, thus the actuarial value of her life
interest was calculated to be worth
96% of the value of the entire home).
The court held that the wife was
entitled to only a life estate in the
one-half of the property owned by her
husband and that this interest would
end if she chose to sell. The court
relied, in particular, on the wording of
the Estate Administration Act, section
96, which provides that the life estate
shall exist for “so long as the surviving
spouse wishes to retain the estate for
life.” At para 17, Groberman, J found,
“This language is inconsistent with
the idea that the beneficiary of the life
estate may choose to sell it.”
The court held that the wife’s
application for partition and sale was
inconsistent with any wish to retain the
estate for life. Accordingly, the wife’s
life estate would be extinguished upon
sale and thus had no value.
Conclusion
Life interests have long been
important estate planning tools and
it is expected that their use will
continue as such. We can anticipate
more litigation involving these estates
as our society becomes more complex
and life expectancies increase. s
Trevor Todd restricts his practice to
Wills, estates, and estate litigation. He
has practised law for 33 years and
is a past chair of the Wills and Trusts
(Vancouver) Subsection, BC Branch of
the Canadian Bar Association, and a past
president of the Trial Lawyers Association
of BC. Trevor frequently lectures to
the Trial Lawyers, CLE, and the BC
Notaries and also teaches estate law to
new Notaries. His Website includes 30
articles on various topics of estate law.
Judith Milliken QC has practised law for
32 years in the areas of commercial law,
criminal law, and most recently estate
litigation. She practises estate litigation
together with her husband Trevor Todd.
Volume 17 Number 4 Winter 2008