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Friday, April 18, 2014

Beneficiaries got nothing when executor used the house for security - and lost it

There is a new case from the Ontario Court of Appeal this month that I believe holds a really valuable lesson for beneficiaries. It's the case of DiMichele v. DiMichele. The facts, briefly, are that Mrs. DiMichele died in 1996, leaving her son,  Antonio, as her executor. She left her estate among her three children.

One of Mrs. DiMichele's other kids, Roberto, lived in the house after his mother died. The executor did nothing about the estate, and neither of the other two beneficiaries bothered to try to get him to do anything. In 2002, Antonio was involved in some personal (non-estate) litigation and put up the entire house, rather than the 1/3 he was supposed to inherit, as security. In 2010 he lost the case and the winning party applied to the court to take the house.

Antonio lost, and appealed to the Court of Appeal. However, the court said that as an executor, Antonio had the right to grant the mortgage on the entire property, based on the laws of property in Ontario. This is because at the Land Titles Office, Antonio's name was on the property. This was the case, even though Antonio has misrepresented himself as the owner rather than the executor. The court ruled that the party suing Antonio was entitled to take the house. The beneficiaries lost out.

To read a report of the case that contains more of the facts, and more details about why the judge made this decision, click here to go to a story at www.lawtimesnews.com.

I hope you can see where I am going with this in terms of lessons learned by the beneficiaries. The three beneficiaries lost the largest asset in their mother's estate. Roberto lost his home. This could not have happened had they not let so many years pass without making some effort to force the executor to sell or transfer the house.

There is no evidence that either of the other two beneficiaries said or did anything to induce Antonio to get on with the estate in the six years before he put the house up for security. If he had proved himself to be reluctant or slow, they could have relied on the courts to hurry him along, or even to remove him as executor if necessary. This case shows that beneficiaries need to stand up for themselves.

Now the question remains as to whether there is anything the beneficiaries can do against Antonio for the loss of the estate. Perhaps the current court ruling will make that more difficult. And even if they were to succeed, it doesn't sound as if Antonio has two nickels to rub together, never mind enough money to pay out his siblings.


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