A recent (and very brief) Court of Appeal decision, Policelli Estate v Zita, 2014 ONCA 810, confirms that there are ways in which estates can be structured in order to protect bequeathed property from the creditors of beneficiaries.
The testatrix in this case had left her son a life interest in her house. A creditor of the son sought to secure an interest against the home in payment of the son’s debts. The trial judge dismissed the claims, stating that they were an attempt by the creditor to essentially re-write the testatrix’s will to have the son be fully entitled to the property and that the court had no authority to do so.
The applicant appealed the matter to the Court of Appeal. The appellate court stated that, in order for the creditor to have a valid claim against the house, the son would have had a proprietary interest in the home and that the life interest was not sufficient. The court stated that, “[t]he will did not grant [the son] a right to the house itself. Therefore, the appellant can have no higher right.”
This decision highlights the importance of consulting an estates lawyer when structuring your estate, particularly if you anticipate that any of your beneficiaries may be dealing with creditors in the future.