When an estate trustee during litigation (an “ETDL”) is appointed, their powers are broad, but not unlimited. Section 28 of Ontario’s Estates Act expressly confirms that an ETDL has all of the rights and powers of a general administrator, but does not have the ability to distribute the residue of an estate.
At first glance, this restriction may appear straightforward – estate residue is typically conceptualized as “that which remains” after debts, legacies, devises, fees, and expenses have all been satisfied: see Gunn Estate, Re, 2009 PESC 38. However, as demonstrated by the Ontario Superior Court of Justice’s recent decision in Tyll v Tyll, 2025 ONSC 5280, this term may be more nuanced, depending on the circumstances.
The Facts
The testator in Tyll v Tyll had three sons, and also co-owned her home with one of them. While her son Wolfgang held a one-third interest in the home, the testator held the remaining two-thirds interest. Several years prior to the testator’s death, Wolfgang – acting both as a co-owner and pursuant to a power of attorney executed by the testator – sold the home. Wolfgang kept just over one-third of the sale proceeds in his personal bank account, whereas he deposited just under two-thirds of the sale proceeds into the testator’s account.
The testator’s will also directed her estate trustee to sell the home and distribute the proceeds from the sale. The will left Wolfgang $20,000 from the sale proceeds, and directed that the remaining net sale proceeds be divided equally amongst the testator’s three sons.
Following the testator’s death, an ETDL was appointed to administer her estate due to litigation amongst the deceased’s children. Subsequent to the ETDL’s appointment, one of the brothers sought a court order directing the ETDL to pay him and his brother their one-third shares of the sale proceeds. Whereas Wolfgang had already taken his share of the sale proceeds, his brothers had not received theirs. The ETDL did not object to making the payment out of the estate, but applied to the court for direction.
The Court’s Analysis
Despite objections raised by Wolfgang, the court granted the order and directed the ETDL to distribute the remaining two-thirds of the sale proceeds to Wolfgang’s brothers.
In his reasons, Justice Bale confirmed several key points:
1. There is statutory protection against ademption when property gifted in the testator’s will is sold by their attorney.
Even though the testator’s home was sold prior to her death, the gift in the will consisting of the sale proceeds did not adeem because the home was sold by the testator’s son in his capacity as her attorney. Section 36 of the Substitute Decisions Act (the “SDA”), combined with section 38, confirms that if an attorney disposes of a specific testamentary gift while the grantor is incapable, the gift will not adeem, and the beneficiaries will remain entitled to receive the equivalent value of the gift from the residue of the estate.
2. The ETDL’s power to distribute the testator’s estate may extend to funds held in the residue of an estate.
Justice Bale held:
“A payment from the residue of the estate pursuant to s. 36 of the Substitute Decisions Act is not a distribution of residue within the meaning of s. 28 of the Estates Act. Rather, it is an appropriation from what would otherwise have been residue, for the purpose of fulfilling a specific testamentary gift.”
Accordingly, the ETDL could distribute the remaining proceeds from the sale of the house out of the estate residue, even though an ETDL cannot distribute the residue of an estate in the ordinary course.
In an interesting twist, Justice Bale also commented on a prior court order that restricted the original estate trustee from distributing the testator’s estate, confirming that the order did not restrict the ETDL’s ability to distribute the estate as an independent officer of the court pursuant to section 28 of the Estates Act.
Key Takeaways for Practitioners
For estate litigators, Tyll provides valuable clarity – the restriction articulated in section 28 of the Estates Act that bars ETDLs from distributing estate residue is not absolute. For example, an ETDL may be able to make payments out of the estate “residue” so long as section 36 of the SDA is at play. This case ultimately underscores that:
- section 28 of the Estates Act empowers ETDLs to act as independent officers of the court, and will not preclude an ETDL from making payments out of the residue of an estate in order to fulfill statutory entitlements; and
- a testamentary bequest subject to section 36 of the SDA does not become part of the residue of the testator’s estate, even though payment to the beneficiary in lieu of the gift is to be made from the estate residue.
Thank you for reading, and have a wonderful rest of your day!
Suzana.