When someone is declared mentally incapable under the law, a committee is appointed to make his or her personal or financial decisions. The committee is under a fiduciary duty to act in the patient’s best interests. Questions may arise: Should the committee sell the patient’s family home? What if that property was a treasured family place?
Whether a court will allow a committee to sell property belonging to the patient he or she represents will depend on the circumstances. Under the Patients Property Act, RSBC 1996, c 349, the committee must act for the benefit of the patient and his or her family. The court will consider whether the sale of property is “necessary for or in the interests of the proper, honest, and prudent management of the estate”. This has been interpreted to be a question of whether a reasonable and prudent businessperson would think the transaction is beneficial to the patient and his family, given the circumstances that are known and the possibilities that may arise, such as likelihood of recovery or increased care costs. The committee does not necessarily need to show that the sale is required for the patient’s care or maintenance of his or her estate.
A recent decision by the BC Supreme Court illustrates how the court approaches this question where the patient’s immediate family disagrees about the sale of a family property. In Bronson v. Coates, 2015 BCSC 1207, Ms. C had been appointed committee of her father’s person and estate. Mr. C was indefinitely hospitalized and suffering from irreversible severe dementia. Ms. C applied for an order allowing the sale of two properties owned by her father. She submitted evidence that the offers were for fair market value. Mr. C did not need the money for his care or maintenance. Ms. C planned to invest the proceeds of the sale for his benefit.
Mr. C’s other children opposed the sale. They wanted to keep the properties in the family and ultimately buy the properties themselves, using their inheritance from their father. They argued that this is what Mr. C wanted. There was no indication of this intention in his Will. On the evidence before the court, it was not clear how much longer Mr. C would live and, as such, when the other children could expect to purchase the properties.
The properties at issue were a waterfront parcel where the family home was located, and an adjoining 14-acre farmland lot, which mitigated water supply issues on the home property. The land and home had been unoccupied for approximately two and a half years, as Mr. C and his wife had moved into a care facility. Ms. C estimated that running the properties cost at least $20,000 annually, and noted that she had had to spend almost $54,000 on repairs and maintenance in one year. While her siblings argued she ought to have rented the property out to offset these expenses, market rent would not meet these costs.
The court allowed the sale, despite the opposition of Mr. C’s two other children and their plan to buy the properties. Master Bouck cited various factors to support his decision that selling the properties would be beneficial to both Mr. C and his family:
- (a) the sale of the property would result in a “probable increase” rather than a “definite diminution” of the value of Mr. C’s estate, thereby benefitting both him and his family. The high maintenance costs associated with the property were a drain on the estate. The sale proceeds would likely grow if Ms. C invested them;
- (b) the sale made practical sense in that the offer related to both the waterfront parcel and the adjacent farmland, such that the water supply issues to the home property would be addressed;
- (c) the offer was for the fair market value; and
- (d) Mr. C had made no effort to keep the properties in the family through his estate planning or by transferring the properties into joint tenancies with the children.
As a result, the sale of the properties was allowed to proceed over the objections of two of the three children. In making this decision, Master Bouck stated that the Court is “not entitled to consider the wishes of the patient’s heirs, only whether the family will benefit from the sale”. In the circumstances, the family as a whole would benefit from the committee’s disposal of the patient’s property, even though it meant losing “a venue of past happy times”.
If you have questions about estate planning or estate litigation, please feel free to contact one of the lawyers in our Wealth Preservation + Estate Litigation Practice Group.