The executors of an estate are obliged to carry out the terms of the deceased’s Will. That involves gathering in the deceased’s assets and using those assets (including selling any of them if necessary) to pay the costs of administration of the estate and the deceased’s debts. After all liabilities have been paid the executors must (depending on the term of the Will) transfer any assets given specifically to beneficiaries to those beneficiaries, or sell the assets and pay the proceeds to the beneficiaries. In a recent case two daughters unsuccessfully endeavoured to use a section of the Trustee Act 1956 to secure ownership of some land that had not been specifically left to them under their father’s Will.
The daughters’ father had purchased four hectares of land and used it as a market garden and later as a vineyard and winemaking business. All the family had assisted in these businesses. The father died in 1975 leaving the mother the right to receive the income from his estate for her lifetime. The Will permitted the father’s trustee to postpone the sale of the land. On his wife’s death the father’s estate was to pass equally to their four children. The land was the only asset of the estate.
One of the daughters had been living on the land most of her life at the time of her mother’s death. When the mother died, that daughter and another daughter wanted part of the land transferred to them, but they could not agree with their two siblings on the price of the land. The land was in several lots and could be subdivided.
The daughters asked for the court to make an order under section 14(6B) of the Trustee Act (called a “partition order”). This section permits the court to order part of the land of a deceased person’s estate to be transferred to a person “interested” in the estate if the court is satisfied that this would be advantageous to anyone “interested” in the estate.
The court considered the law and the wording of the father’s Will and concluded that ultimately the trustee of the estate was required to sell the land and divide the net proceeds equally between the four children. Although the children as residuary beneficiaries were “interested” in the entire estate, they did not have an “interest” in the land itself. The court said the children might have been entitled to a partition order if the father’s Will had specifically gifted the land to the children.
The court also said that, even if they had concluded a partition order was legally possible, they would not have found it “advantageous” to those interested in the estate to make the order because the valuation evidence provided to the court did not show it was advantageous to do so.
The court acknowledged this was an unfortunate result for one of the daughters in particular because of her life-long connection to the land. The court suggested the trustee put the land up for tender in separate parts. This would give the daughters the opportunity to bid for the land they wanted and would mean the trustee could accept the offers that gave the best price to all the beneficiaries.
Please email me at [email protected] with your ideas for future articles. Keep an eye out for next month's column, where I will discuss another relevant rural legal issue.
Barbara McDermott is a partner of Norris Ward McKinnon, specialising in commercial and rural law. With offices in Hamilton and Huntly, we have friendly, expert legal advisors ready to help you with your business and personal legal matters.
