Tag: valuation date
Cohabitation Agreements and Marriage Contracts typically operate to ensure that spouses, be they common law or married, do not benefit in the estate of the survivor other than as provided for in a Will. For example, where a Will is not made, and if the parties are married, the domestic contract will need to provide that the surviving spouse is precluded from receiving the preferential share that would otherwise pass to him or her.
Despite the best intentions of the parties to such contracts, difficulties may nonetheless arise on the death of a spouse even where the surviving spouse has every intention of abiding by the agreement.
One such example of a common problem that may arise relates to the purchase or “buy-out” of the surviving spouse’s interest in real estate in which the estate has an equal interest. The problems that the parties may encounter include:
- at what date is the value of the property to be determined? The date of death or the date of the hearing which may be many months later
- Are adjustments to be made for any reason? and
- Should the purchase priced be adjusted to account for occupation rent and, if so, how is the occupation rent calculated?
In Psarros Estate v. Cook, Justice Akbarali of the Ontario Superior Court of Justice considered these questions and, on the facts of the case, concluded:
- It was an implied term of the Marriage Contract that appraisals be carried out “within a reasonable time of the decision to sell one party’s interest to the other.” As such, the fair market value was calculated as of November, 2013 rather than 2017;
- In this case there was insufficient evidence to consider adjustments; and
- Occupation rent, if any, is offset by the estate’s share of the expenses incurred by the surviving spouse and occupant.
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Other blog posts that may be of interest:
The recent B.C. Court of Appeal decision of McMillan v. Johnson (Estate) 2011 BCCA 48, deals with the valuation of an unjust enrichment claim of a long-time common law wife against the estate of her deceased common law husband.
The couple lived together for almost 40 years and both contributed to a family fishing business, of which the deceased was the sole shareholder. The deceased did not properly provide for his wife and although she would have had a claim under the Wills Variation Act, she was out of time and so claimed a constructive trust against the only valuable asset in the estate, a $2.4 Million shareholder’s loan owed to the deceased by the fishing business.
The trial below proceeded summarily and rather than declaring a constructive trust, the trial judge awarded the wife a monetary remedy of 50% of the value of the loan ($1.2 Million).
On appeal the estate argued that the value should have been assessed at 50% of the market value of the company at the time of trial, which would reflect the decline in the fishery since death, and that the judge erred in awarding the book value of the loan valued as at the date of death. The estate led no evidence of the actual value of the company at trial and sought to introduce this as fresh evidence on appeal.
The appeal was allowed and a new trial ordered on the question of the value of the loan and the company as at the date of the new trial. Fresh evidence as to the value of the company was not allowed. The judge intended to award a monetary remedy in lieu of a proprietary remedy, and therefore the valuation date should have been the date of trial.
If you are interested in a more in depth consideration of the case law on constructive trusts, unjust enrichment and quantum meruit, and whether/when an in personam monetary remedy or proprietary remedy is appropriate, you should refer to the decision for some helpful comment on these issues.
Sharon Davis – Click here for more information on Sharon Davis.