CANADA Trends and Developments Contributed by: Ian Hull, Suzana Popovic-Montag and Nick Esterbauer, Hull & Hull LLP
categorised as either a right of first refusal or an option to purchase. As noted in Yurkiw Estate (2011 ABQB 97), these are two distinct types of clauses. An option to purchase in a will creates an immediate interest in the estate property – the property must be sold, and the beneficiary must receive the first oppor - tunity to purchase it. The beneficiary may even compel a sale. In comparison, a right of first refusal in a will is a prom - ise not to convey the property without giving the ben - eficiary an opportunity to purchase it. The beneficiary will not have an immediate interest in the property and cannot compel the estate to sell it. However, if the estate accepts an offer to purchase the property from a third party, the right of first refusal will be converted into an option to purchase, and the beneficiary will be able to enforce their interest in the estate asset. If a will includes an option to purchase, it may specify the terms on which the option must be exercised. For example, the will may specify a deadline for exercis - ing the option, or a deadline for the completion of a sale. The will may also set a sale price for the asset and impose other requirements, such as obtaining an appraisal. See, for example, Estate of Shirley Ann Dufour (2024 ABKB 525); Deziel v Deziel (2024 ONSC 5279); Pendlebury v Pendlebury (2025 ONCA 443); and VanSickle Estate v VanSickle (2022 ONCA 643). Such clauses may result in litigation if there is uncer - tainty as to whether the option has lapsed, whether the option has been exercised in compliance with the will, or whether the testator would have required a literal interpretation of the clause. The court noted in Deziel that courts are to utilise the armchair principle when interpreting such will clauses, reading the will as a whole and also considering the surrounding cir - cumstances when the will was made. Whether the will grants any salient powers to the trustees, such as the power to postpone a sale, may also be salient. If an option is exercised, but not in compliance with the terms set by the will, the sale of the estate asset may be set aside, as was the case in Deziel . Alterna - tively, if one of the requirements attached to an option to purchase would defeat the option, contrary to the
testator’s intent, the court may rectify the will so the option may be exercised: see Estate of Shirley Ann Dufour . If there is a bona fide dispute over the purchase price of an estate asset, as occurred in Loran v Weissman (2019 ONCA 962), the court may suspend the dead - line for exercising the option to purchase, rather than require the beneficiary to forfeit the right to exercise the option before the dispute is resolved. If a beneficiary does not attempt to exercise an option to purchase an estate asset in compliance with the terms of the will, the court may refuse an application to exercise the option brought by the beneficiary after the deadline set in the will has passed. Such applica - tions were refused in both Cambareri v Sorrenti (2023 ONSC 4918) and Bank of Nova Scotia v Charles (2021 ONSC 1361). In both cases, neither beneficiary took meaningful steps to exercise the option to purchase by the deadline set in the will, nor sought to extend the deadline before it passed, nor presented evidence confirming that they had the means to complete the purchase. In Cambareri , the court also confirmed that an option to purchase in a will does not come into effect until the testator’s death. Estate planning involving RRSP transfers to spouses and common-law partners If a taxpayer executes a beneficiary designation that names their spouse or common-law partner as the beneficiary of their RRSP, it is now clear that the Canada Revenue Agency (CRA) cannot use that RRSP to cover any tax debt that may be owed by the deceased’s estate. Section 160 of the Income Tax Act, RSC 1985, c 1 (5th Supp) authorises the CRA to use certain assets, including RRSP proceeds, to satisfy a taxpayer’s out - standing tax liabilities if the property is transferred to a person who is not at arm’s length from the taxpayer. There has been some uncertainty in the past as to whether this provision prevented the CRA from using an RRSP to pay a deceased taxpayer’s tax liabilities if their spouse was the beneficiary of the RRSP. In Kiperchuk v The Queen (2013 TCC 60), the Tax Court of Canada held that this provision did not apply
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