Intestate Estates and Mortgage Insurance
One would be forgiven for believing that the determination of who is entitled to take on an intestacy is fairly settled law. In accordance with Part II of the Succession Law Reform Act (the “SLRA“), if a person were to die intestate leaving a surviving married spouse and two children, the first $200,000.00 of their estate would go to the surviving spouse as a preferential share. In the event that there were any assets in the estate after the payment of the $200,000.00 preferential share, such funds would be equally shared between the spouse and the two children, with each party receiving 1/3 of such amounts.
In Re: Estate of Richard Lewis Crane, the Ontario Superior Court of Justice was faced with the issue of whether mortgage insurance should be taken into account when calculating the “net estate” available for distribution on an intestacy. In such a case, the Deceased died intestate with a surviving wife and two children. The majority of the Deceased’s assets passed outside of his estate to his wife as the surviving joint owner. The only asset which passed through the estate was real property worth approximately $294,500.00, which was subject to a mortgage in the amount of $100,339.26. The Deceased held mortgage insurance on such a mortgage, which provided that the mortgage was to be paid off in its entirety in the event of his death.
The question which was posed to the court was whether, as a result of the fact that the mortgage in question would never be payable by the estate as a result of the mortgage insurance, if the value of the mortgage should not be deducted from the value of the property in calculating the “net value” of the estate which would be available for distribution. If the value of the mortgage insurance was included as part of the “net value”, the Deceased would have died with an estate valued at approximately $294,500.00. As such an amount is in excess of the $200,000.00 preferential share, it would result in funds being available for distribution to the two children. If the value of the mortgage insurance could not be taken into account in calculating the “net value” of the estate, the Deceased would have died with an estate valued at approximately $194,160.74. As such an amount is below the $200,000.00 preferential share, such a valuation would result in the entirety of the estate being distribution to the surviving spouse.
After reviewing the jurisprudence on point, and careful consideration of what they viewed as the intention of the statute, Justice Broad ruled that the value of the mortgage insurance was to be taken into account in calculating the “net value” of the estate available for distribution. As a result, the Deceased died with an estate valued at approximately $294,500.00. As such an amount is in excess of the $200,000.00 preferential share, it would result in funds being available for distribution to the Deceased’s children.