The recent Saskatchewan King’s Bench decision in Kowalinski v Kowalinski (Estate) is an example of how some estates can devolve into bitter quarrelling between the children of a deceased.
Factual background:
This matter arose out of the Estate of Maria Kowalinski (“Estate”). Maria (“Deceased”) had died on February 3, 2016. Since that time, her children had been engaged in costly and exhausting disputes over various aspects of the Estate. The Estate was still not fully distributed as a result, despite the fact that the deceased had died quite a few years previous.
There were four beneficiaries of the Estate, being
- Maria’s son Terry;
- Maria’s daughter Beth;
- Maria’s daughter Iris; and
- Maria’s grandson, Delaney.
A summary of some of the background is below:
- Marie executed her Will on April 23, 2013. She appointed her three children, Terry, Beth and Iris as executors. It is clear that there had been a pattern of Maria loaning money to her children, particularly Terry and Iris. This habit of lending monies had led to suspicion amongst the other children;
- At one point, Terry was meeting with Maria and, for some reason, discovered that there was a collateral mortgage registered against Maria’s home on Shea Crescent in Saskatoon in the amount of $60,000. Maria confirmed that a mortgage (“Iris Loan”) was granted in order to secure a $60,000 loan from Maria to Iris.
- Terry took Maria to Maria’s lawyers. The lawyers recommended that Maria prepare a holographic codicil removing Iris as an executor. This was done, and the codicil, written on October 7, 2015, read as follows:
This is a codicil to my will dated April 23, 2013. I remove Iris Theresa Kowalinski as an executor of my Esetate (sic).
Iris Theresa Kowalinski owes me $86,600.00 for amounts I have lent loand (sic) to her which remain unpaid. Therefor (sic) her chare (sic) shall be reduced by $86.600.00$ (sic) plus any adittional (sic) debt and interest (sic) which may apear (sic).
Any costs of collecting (sic) from Iris shall be charged to her share.
- Unfortunately, it appeared that no one actually looked to discover that the Iris Loan had already been paid off and Maria was in a position to insist that the mortgage be discharged.
- Terry thereafter began to take steps to place the Estate in a position where probate would not be necessary. Terry arranged for Maria’s tax-free savings account to be placed in his sole name. He also had title to Maria’s home registered in his and Maria’s names, as joint tenants. He also then confronted Iris about the line of credit and the mortgage on Maria’s home. Iris took that opportunity to explain to him that the line of credit had been paid in full. In due course, that mortgage was discharged.
- Notwithstanding Maria’s declining health, Iris importuned Maria on January 30, 2016 for an additional $15,000 loan. The loan is recorded in a purple notebook, which was the manner in which Maria kept track of what her children owed her.
- Maria passed away on February 3, 2016.
Will challenge allegations:
- After Maria died, there were multiple court applications wherein Iris sought a trial to bring into question Maria’s mental capacity at the time of the codicil and to require that the Will be proved in solemn form. This was not successful.
- There were also a number of applications engaging Terry and Beth and requiring them to disclose personal property at Maria’s residence on Shea Crescent.
- There was an application brought by Iris to permit cross-examination of Terry, Beth and Delany on their affidavits. This engendered significant legal fees, but created evidence which the Court described as of “only moderate probative value.”
Issue:
The Court determined that a number of issues required determination. This case comment focuses on the below issues:
- Should Terry and Beth receive executors’ fees, and, if so, how much?
- Who pays the parties’ respective legal expenses?
- There are a number of personal items whose ownership is contested. How should those chattels be divided?
Findings by the Court:
- Should Terry and Beth receive executors’ fees and if so, how much?
The Court found that there was no question that Terry and Beth put in a significant amount of time dealing with matters arising from the Estate. However, the Court held that much of their efforts had nothing to do with the administration of the Estate, but such efforts were rather in engaging in battle with Iris.
For context, in Saskatchewan, a court will often award compensation which in an amount which is a global 2-3% of the Estate. In this context, the Court ordered that Beth and Terry were to receive compensation on the lower end of the spectrum:
- That Beth was to receive 1% of the Estate for her compensation;
- That Terry was to receive 0.5% of the Estate.
- Who pays the legal expenses?
Terry and Beth took the position that Iris was the primary cause of the entire litigation and that she should pay the costs of such legal expense.
The Court however found that there was plenty of blame to be spread around all three siblings. Accordingly, the Court ordered that each person shall bear their own costs.
However, the Court ordered that any future legal fees from this date onwards, shall be borne by the Estate, subject to being taxed by the Court.
- There are a number of personal items whose ownership is contested. How should those chattels be divided?
The siblings were disputing how to divide certain chattels. These ranged from wood carvings, a nutcracker bowl to a black diamond pendent necklace. Unfortunately, in their respective briefs, each side creates a slightly different list of chattels in debate.
The Court held that there was no correct way to divide the chattels, but yet it was “a task that must be accomplished in order to bring the estate bickering to an end.”
The Court ultimately selected a unique and uncommon method of dividing up the chattels. The Court directed that the judge would draw names from a hat to determine ownership:
44 I conclude that “luck” is the best arbiter. I direct counsel to prepare a list of chattels that are in debate. Perhaps the siblings can agree on some so that we do not have a raft of items to deal with. However, I leave that to them.
45 In any event, when the list is prepared, it is to be forwarded to me through the Local Registrar and I will then set a date to draw names from a hat to determine ownership of the chattels in issue. The draw will take place in a courtroom and on the record.
Conclusion:
Any person who has hired a litigation lawyer in Saskatchewan knows that the legal fees to go to court (and prepare written evidence and argument) are significant. For any thoroughly disputed matter, the legal fees will easily get into the five figures for each side.
Despite this, estate disputes can often be extremely controverted, because there is an understandable emotional dynamic, when one family member perceives that there are questions of whether their beloved love one (usually a parent) was taken advantage of, or whether another sibling is trying to get more than their fair share.
Kowalinski reminds us that such disputes, even when the positions are sincerely held, may not result in an outcome that all parties (or, at the very least, the Court) may consider to be proportionate to the time and legal cost of litigation. However, to be candid, this problem shows no sign of resolving itself. So long as there are situations in which siblings distrust each other, and there is some murkiness as to exactly what a deceased parent intended for their money and estate, emotional estate disputes will continue to exist.
One proactive cure for this, is for persons to ensure better communication with their own children or estate beneficiaries, during their life. If the Deceased in this situation had sat all of her children down, and calmly explained exactly who had received what monies from her in the past, and what the Deceased nevertheless wished for her Estate in future, some of this litigation may have been avoided.