Wednesday, January 21, 2009

Zalopsky Estate

When she died on November 7, 1971, Mary Zalopsky had eight living children, three of whom, lived in her house at 5955 McKinnon Street, in Vancouver, B.C. In her will, she directed her executor as follows:

the said house at 5955 McKinnon Street, in the City of Vancouver, Province of British Columbia is not to be sold but is to be used, for the sole use and benefit, by my single, unmarried children which are living in it now namely, LENA ZALOPSKY, VICTORIA ZALOPSKY and ROSE ZALOPSKY. After the last of the said unmarried children would die, then it is my wish that the house be sold and the proceeds of the sale be distributed among my surviving children in equal shares.

Thirty seven years later, two of Mary Zalopsky’s children are still alive: Rose Zalopsky and Ann Engen. The house at 5955 McKinnon Street is still standing, but needs repair. Rose Zalopsky moved out of the house in January 2008, and into a care facility. Her affairs are being looked after by the Public Guardian and Trustee of British Columbia.

The Public Guardian and Trustee is a man capable of wearing many hats. The Public Guardian and Trustee was also appointed by the court to complete the administration of Mary Zalopsky’s estate as “Administrator with Will Annexed De Bonis Non” (someday I will write a post explaining what all of that means, but not today). The Public Guardian and Trustee is also the administrator of the estates of two of Mary Zalopsky’s now deceased children, Victoria Zalopsky and Joe Zalopsky. The multiple roles of the Public Guardian and Trustee in this case are not really germane to any of the legal issues, but is more of a fun fact.

When she made her will, Mary Zalopsky might not have considered the possibility that the last of the three unmarried daughters still alive would move out of the house. If she did consider the possibility, she did not deal with it in the will. Could the house be sold while one of the three unmarried daughters was still alive? If so, did the sale of the house terminate the trust for the unmarried daughters? Who ultimately receives the sale proceeds from the house? Only those of Mary Zalopsky’s children who are still alive, or do the heirs of the children who died after Mary Zalopsky receive a share of the proceeds of the sale of the house?

Madam Justice Ross was asked to decide these questions in Re Zalopsky Estate, 2009 BCSC 24. In interpreting a will in British Columbia, the court’s role is to discover what the testator, or will maker, intended when she made the will, on the basis of the wording of the will, and the surrounding circumstances at the time the will was made.

In light of the condition of the house, the fact that there were no funds in Mary Zalopsky’s estate to repair the house, Madam Justice Ross ordered that the house may be sold.

She found that Mary Zalopsky intended to create a life interest in the house for her three unmarried children. In other words, even if none lived in the house, as long as one of them were alive (as it turned out Rose Zalopsky), she would continue to have an interest in the house until her death.

But Madam Justice Ross also held that Rose Zalopsky could disclaim her life interest in the house, bringing the trust to an end. If she disclaims then the house, or proceeds of sale, could be distributed to Mary Zalopsky’s “surviving children in equal shares.”

This brings us to the most vexing question: who is entitled to the proceeds of the sale of the house when the life interest ends? If Rose Zalopsky disclaims her interest, are the proceeds divided into two between Rose Zalopsky and Ann Engen as the “surviving children” when the life estate ends? Or are the proceeds to be divided into eight equal shares, with the estates of the six children who survived Mary Zalopsky, but have since died, also entitled to equal shares? Does “surviving children” refer to all of the children who outlived Mary Zalopsky?

The wording of the will is ambiguous. It does not say what or whom the children must survive.

Madam Justice Ross applied a presumption, known as a presumption of early vesting. In this case the interests of the children in the house could arise either at the date of Mary Zalopsky’s death, or at a later date when the life interest of the last to die of the three unmarried children ends. The court applied the presumption that the interests of the children arose at the earlier date, being the date of Mary Zalopsky’s death. Accordingly, all of those of her children surviving at the date of her death were entitled to an interest in the house. Of course, only the three unmarried daughters got to live in the house, and most of the others who have died never received any funds from the house.

As a result, if Rose Zalopsky disclaims her life interest in the house (or the Public Guardian and Trustee disclaims the interest on her behalf), then the proceeds of the house will be divided eight ways. Each of Rose Zalopsky and Ann Engen will receive an eight, and the estates of each of the now deceased children who survived Mary Zalopsky will receive an eight, which will ultimately go to their heirs (which in an added wrinkle are in some cases the other siblings).

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