Estate Planning

Judgment Creditors - What Assets Can They Claim?

By Hull & Hull LLP

Ker Estate v. Stevenson, a recent decision from the Ontario Court of Appeal, considered whether an annuity left to a beneficiary under a will could be encroached upon by a judgment creditor. 

In this case, the deceased directed that half the residue of her estate be used to purchase a non-commutable life annuity for her daughter.  On the daughter's death, what remained in the annuity was to be used to purchase a non-commutable annuity for the deceased's grandson. 

After the deceased's death, the daughter had been involved in litigation which resulted in a judgment against her.  Prior to the annuity being purchased, the judgment creditor sent a notice of garnishment to the executors requiring them to satisfy the judgment.

The executors sought the court's direction as to, in part, whether the share of the deceased's daughter could be encroached upon to satisfy the judgment. 

The motions judge found that the funds available for the daughter's benefit vested in her on the deceased's death and were available to satisfy the judgment. 

The grandson (who had an interest in the remainder of the annuity) appealed the decision on a number of grounds, a major one of which was that the court erred in finding that the annuity vested in the daughter on the deceased's death. 

The Court of Appeal examined the nature of an annuity and, in its review of the jurisprudence, found that it could best be characterized as a legacy.  The fact that it was 'non commutable' was not sufficient to persuade the court it should be characterized otherwise.  Moreover, the Court pointed to case law which suggested that the beneficiary of an annuity under a will had the right to call on the payment of the cash value of the annuity prior to its purchase. 

As a result, it affirmed the motions' judge's finding that the right to the annuity vested in the daughter at the deceased's death and could be encroached upon by the judgment creditor. 

Have a great day!

Megan F. Connolly 

Full post as published by Toronto Estate Law Blog on May 05, 2009 (boomark / email).