In Ontario, the beneficiaries of an estate do not have the right to demand an interim distribution of their inheritance while the estate is being administered. If an interim distribution is requested, the estate trustee typically has discretion over whether to grant the request, unless the beneficiary successfully applies to the court for an order to compel an interim distribution.
In Parson v McGovern, 2014 ONSC 1785, the Superior Court of Justice held that the court ought to consider the following questions when determining whether to compel an estate trustee to make an interim distribution:
- Are the estate trustees deadlocked?
- Have the estate trustees acted with mala fides?
- Have the estate trustees failed to exercise their discretion to make an interim distribution?
- Have the estate trustees behaved unreasonably or breached their fiduciary duty and duty of good faith and fairness to the beneficiary?
- Would a beneficiary suffer undue prejudice if an interim distribution is not made?
Against this backdrop, a recent Ontario decision, Pitt v Beattie, 2025 ONSC 5654, considered a novel argument for compelling an interim distribution under circumstances not addressed in Parson v McGovern – whether an estate trustee can be required to make an interim distribution while estate administration is still ongoing on the basis that the beneficiary could collapse the trust early using the rule in Saunders v Vautier (1841), 41 ER 482.
Background
In this case, Ms. Pitt was the only beneficiary of the estate. Although the will directed that the residue be held in trust until Ms. Pitt reached the age of 25, the estate trustee recognized her right to receive the funds early and distributed $100,000 to her during estate administration, without conditions, leaving approximately $397,000 in trust.
Ms. Pitt asked the court to order a further interim distribution of $300,000, relying upon the rule in Saunders v Vautier. The estate trustee opposed the motion, arguing that the rule did not allow a beneficiary to bypass the administration of the estate. He also argued that the residue of the estate could not be determined at the time of the motion, as Ms. Pitt was suing the estate trustee for selling the estate’s main asset, a property in London, Ontario, to his son and daughter-in-law, alleging that the sale was improvident and that the property had not been placed on the open market.
The rule in Saunders v Vautier
The rule in Saunders v Vautier often arises where property is to be held in trust until a beneficiary reaches a specified age. Under the rule, a beneficiary, or multiple beneficiaries acting jointly, may collapse the trust early so long as they are of full legal capacity, or sui juris, and are absolutely entitled to all of the rights of beneficial ownership in the trust property.
Interim distribution denied
Justice Nicholson agreed with the estate trustee, holding that the rule in Saunders v Vautier does not allow a beneficiary to override the estate trustee’s discretion to decline a further interim distribution where that discretion is exercised reasonably and the residue remains uncertain. Simply because there was no dispute as to Ms. Pitt’s entitlement to the residue did not mean that she could obtain the requested distribution while the estate was still being administered.
Citing Furfari v Furfari, 2016 ONSC 4882, Justice Nicholson noted that a beneficiary has no legal entitlement to an interim distribution. Moreover, a court may not substitute its own discretion for that of the estate trustee with the exception of three situations recognized in Parson v McGovern – a mala fide exercise of discretion, a failure to exercise the trustee’s discretion, or a deadlock between trustees as to the exercise of their discretion. Justice Nicholson held that there was no reason to intervene with respect to the estate trustee’s exercise of discretion in this case, as the trustee had not exercised his discretion mala fide, and “[i]n the absence of such misconduct … the cases require the court to be deferential to the discretion of the estate trustee unless there is a valid reason not to be.” On this basis, the court declined to order the requested interim distribution.
Moreover, no authority was cited in which a sole beneficiary sought to obtain their entire entitlement pursuant to the rule in Saunders v Vautier while the estate was still being administered.
No basis to intervene in exercise of discretion by the estate trustee
The estate trustee’s decision was entitled to deference on several bases. For example, the court took note that Ms. Pitt had led no evidence of financial hardship or that she would suffer prejudice if she had to wait for her inheritance. The value of the residue was also genuinely uncertain. Not only was the estate trustee unable to pass his accounts because of the ongoing litigation, but the court also accepted that estimated future litigation costs could constitute a legitimate holdback, even though the estate trustee was defending his own conduct and it was unknown whether the estate trustee would be indemnified by the estate at the conclusion of the litigation. If Ms. Pitt were successful, the court recognized that there was a “strong likelihood” that costs would be payable by the defendants, including the estate trustee, but that if the defendants were to prevail, Ms. Pitt would likely pay a portion of their costs, and the estate trustee might be entitled to full indemnity from the estate.
Justice Nicholson also noted two offers made by the estate trustee to Ms. Pitt – an unconditional distribution of $100,000, offered before the motion was heard and accepted by Ms. Pitt, and a distribution of $200,000 conditional on the completion of a partial release. The court recognized that the two offers did not amount to the estate trustee holding Ms. Pitt’s inheritance hostage, and therefore did not merit intervention.
Takeaways
The court’s decision in Pitt v Beattie indicates that the rule in Saunders v Vautier cannot be used to compel an interim distribution from an estate that is still being administered where the value of the gift being held in trust is uncertain and the trustee exercised their discretion reasonably. It appears that a beneficiary seeking to compel an interim distribution will generally need to establish a basis for the court to intervene in the estate trustee’s exercise of discretion. Evidence of bad faith, a failure to exercise discretion, or, where applicable, a deadlock, may support the court’s intervention, while evidence of prejudice or financial hardship may also be relevant.
On the flip side, estate trustees may take some comfort that a reasonable exercise of discretion, such as an unconditional partial distribution paired with a reasoned basis for holding back the balance of the beneficiary’s inheritance, is entitled to deference, even where the trustee’s own conduct is under attack.
Thank you for reading, and have a great week.
Ian.