Recently, I was looking over some of the leading cases in life estates. One of the questions that stood out in my mind was whether or not a life estate has a quantifiable value.
Aho v. Kelly, was heard in British Columbia in 1998, but remains a leading Canadian case that is often referred to when the valuation of life estates are being considered.
In Aho v. Kelly the wife and two children of the deceased were each left a 1/3 interest in the matrimonial home of the deceased. The court confirmed that the wife of the Deceased also held a life interest in the same matrimonial home, as per the jurisprudence in British Columbia. The wife commenced an application seeking a court order that the property be sold and the proceeds be unequally divided amongst the three owners of the property.
The wife argued that the proceeds should be unequally divided because she was entitled to further compensation as she had to be paid out for her life interest.
The Court held that a life estate is a property interest that has “some value”. The Honourable Justice Bauman stated that at common law a life estate is alienable, and that upon its transfer to another party it becomes an “estate pur autre vie” (that other life being the original life tenant). The Court concluded that the life interest has a value capable of capitalization, and that this value should be paid out of the proceeds from the sale of the house.
Aho v. Kelly is not binding in Ontario, however it goes a very far way in establishing the framework by which the value of the life interest can be calculated.
Thank you for reading and have a great day,
Rick Bickhram – Click here for more information on Rick Bickhram.