Options to Purchase and Wills

October 27, 2021 Suzana Popovic-Montag Estate Planning, Litigation Tags: , 0 Comments

You may find yourself in a position when planning your estate of wanting to ensure an equal benefit to all your beneficiaries. However, what happens when one of your intended beneficiaries has invested significant time and work in an asset or business you own? You want to protect the investment this beneficiary has made but also ensure the others get a fair share of your estate.

One approach taken in such situations is to provide the beneficiary who has made the investment the option to purchase the business or asset from your estate, ensuring that their contributions are properly rewarded if they so wish.

In a recent decision, Fletcher and Vansickle v. Vansickle, 2021 ONSC, the testatrix chose this option. She and her husband had jointly run a small farm operation for many years. One of their children, Howard, had invested significant work and time in the farm, and was substantially dependent on it financially.

The testatrix and her husband had executed mirror wills in January of 1985, both of which had identical clauses granting Howard the option to purchase, within one year of the testator’s/testatrix’s death, the “farm business carried on by the  [the Testator]”.

On the testatrix’s death, in 2019, a dispute arose concerning Howard’s right to exercise the option to purchase the farm business.

The core of the dispute revolved around the wording of the option, which stipulated Howard could purchase the farm business being “carried on”. Howard’s siblings argued that as he had been renting the farmland from their mother for several years, and then further subletting it to third parties, neither he nor the Testatrix had been ‘carrying on’ a farming business at the time of the Testatrix’s death, or even for several years prior. As such, the subject of the option to purchase, the farm business, no longer existed.

The court agreed with Howard’s siblings, stating: “In my view, since the Testator did not “carry on” “the farming business” (that is, the active farming business formerly operated by her and her husband) on the date of her death, no option to purchase may be exercised by Howard.”

The rigour with which the court interpreted the words “farm business carried on …” in the context of the option to purchase set out in the subject will, is an interesting reminder to draft such clauses with great caution, so as not to be too restrictive.

Thank you for reading, and have a great day!

Suzana Popovic-Montag & Raphael Leitz

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