Say you loaned one of your children money and he hasn’t repaid all or a part of it at the time of your death? Or what if you downsize and sell your home to one of your children and there remains a balance of sale owing at the time of your death?
One thing you can do is to include a provision in your will forgiving any amount owing to you by any of your children. But that would reduce the value of your estate, which might not be fair to your other children.
You might also think that any amount owing could be deducted from that child’s share of your estate. But what if your estate is not wound up for several years following your death? Here’s what happened in such a case when family love was overwhelmed by the law.
One of Mrs. X’s children purchased her home. He made a large down payment. The balance was to be repaid through monthly payments over 10 years and was secured by a mortgage on the home. None of the payments were made and Mrs. X died 26 months after the sale, at which point over $23,000 was past due.
About five months prior to her death, Mrs. X had signed a new will in which she left the amount owing on the balance of sale to three other family members in proportions of 15 per cent, 35 per cent, and 50 per cent. Fifteen years after her death her estate had not yet been wound up, the last payment on the balance of sale had become due eight years earlier and neither the estate nor the beneficiaries had ever made any demand for payment.
The situation in 2011 was such that the purchaser owed the estate of Mrs. X the full amount of the balance of sale and the beneficiaries of that balance had never been paid. It was at this point that the person owing the money petitioned the court to have his debt, namely the balance of sale, declared prescribed, in other words, no longer payable, and the mortgage erased.
The family members who were to benefit from the balance of sale became defendants in a court case. They explained to the judge that they had never demanded payment from the petitioner for humanitarian reasons and because he was a member of the family.
My own reaction on reading this case was to hope the petitioner lost and the defendants were given their inheritance.
After all, they seemed like nice people and this is what the deceased had wanted. The law, however, came to a different result.
The balance due on the sale was a receivable to the estate and the estate had had a right to claim it. However, the law provides that a right that goes unused for a certain period of time becomes extinguished. This is known as a statute of limitations or, in Quebec, as prescription. In this case that delay was three years from the date a payment was due. The last payment had become due about eight years after the death of Mrs. X.
This was not a situation in which it was impossible for the estate to have claimed the amount owing. On the contrary, the amount could have been claimed at any time. Consequently, the court granted the petition. The petitioner got to keep the house mortgage-free without paying the balance of sale, the deceased’s last wishes were not realized and the three defendants were deprived of their bequests.
There is a saying: “dura lex sed lex”—the law may be hard, but it’s the law. The lesson to be learned here is to avoid waiting too long to exercise your rights. And if you do want to be kind to someone you love, make sure you can do so without depriving yourself of your rights.