Determining inheritance is a matter of timing

(December 2007) When it comes to determining entitlement to an inheritance, nothing rings more true than the old adage, timing is everything.

Back in 1991, Nora Mulligan’s will stated that the three adult children from her first marriage would get whatever money she had at her death, while her husband would continue as surviving joint owner of the house and beneficiary of the residual estate assets.

Fourteen years later, in May 2005, Nora’s sister died without having made a will. According to the rules of intestacy of the province where the sister resided, Nora and her remaining sibling became the statutory beneficiaries. The Public Guardian’s office in the sister’s province initiated proceedings to administer the estate, which consisted of money-type assets, out of which Nora was to receive about $75,000.

In November 2005, the Public Guardian’s application was granted, and the sister’s estate was ready to be administered. Unfortunately, Nora had died some weeks earlier so she would not be able to enjoy that inheritance personally.

As the sole named executor of Nora’s will, Arthur distributed all of her cash — $115,000 — to her children, while the $60,000 house passed to him by right of survivorship. However, a dispute arose as to whether the $75,000 forthcoming from the sister’s estate was to be characterized as “Nora’s money.”

The matter went to court, and after a review of relevant case authorities, the judge held that Nora had “no interest in the specific assets in her sister’s estate … [and] … those assets, accordingly, cannot be the subject of a specific bequest.” That meant the money was now her husband’s.

For Nora’s children to have succeeded in the suit, she would have had to survive not only to the date of the grant of administration of he Public Guardian, but further — to the point where her estate entitlement was properly distributed to her while living. Things may have been different if Nora’s sister had written a will that might have allowed for a quicker administration, or if Nora’s own will had been drafted to cover such contingencies.

As it turned out for Arthur, timing really was everything, and he took that right to the bank.

Doug Carrol is an assistant vice-president, tax and estate planning at AIM Trimark.

(12/24/07)