Does the right of a beneficiary of a life trust to “use” money from the trust fund include the power to save and accumulate wealth? This was the issue addressed by the Ontario Court of Appeal in Holgate v. Sheehan Estate.
John Holgate’s Will and Codicil left a life interest in two trusts to his wife, May Sheehan. On May’s death, the estate was to go to Mr. Holgate’s sons from his previous marriage.
The terms of the primary trust were as follows:
To hold and keep invested the residue of my estate or the amount thereof remaining for the sole use and benefit of my wife, MAY HOLGATE, during her lifetime, with power and authority to my Trustee to draw on both the income and the capital of my estate for the care and support of my said wife, as my Trustee in their discretion considers advisable. In availing themselves of this discretionary power to encroach on the capital of my estate for my wife’s benefit, it is my strong wish and desire that at all times my Trustee’s first consideration shall be my wife’s well-being and comfort and that all her needs and requirements of every kind shall be provided for adequately in all respects out of my estate, as I do not feel that my estate need be largely conserved for the future use of my children and step-children. I therefore authorize and empower my Trustee to be generous in the exercise of this discretionary authority, even though there may be a considerable, or if necessary, total depletion of the capital of my estate by reason of such encroachments. [emphasis added]
The terms of the other trust were similar.
After Mr. Holgate died died, Ms. Sheehan used money from the life trusts for her expenses. She also took money from the trusts to save in her own name, and thereby accumulated wealth. When Ms. Sheehan died in 2012, she left the bulk of her estate to her biological daughter.
After Ms. Sheehan’s death, Mr. Holgate’s sons alleged that Ms. Sheehan violated the terms of the trusts. According to the sons, the terms of the trusts allowed Ms. Sheehan to use the money she took from the trusts but but not save it.
At trial, the trial judge held that nothing in the Will or Codicil precluded Ms. Sheehan from accumulating wealth, and in fact the terms of the trust contemplated the complete exhaustion of the capital of the trust.
On appeal, the Court of Appeal agreed with the trial judge’s interpretation and dismissed the sons’ appeal.
The Court found that the wording of the trust indicated a clear intention on Mr. Holgate’s part to allow his wife unrestricted access to the funds. In reaching its decision, the Court followed the “golden rule” of interpreting Wills: the Court should give effect to the testator’s intention as ascertained from the language that was used.”
The decision in Holgate reminds us that in cases where a court is asked to interpret a Will, the court will look to the language used by the testator in his or her Will in order to determine the testator’s ultimate intention. The Holgate case also provides a precedent from a higher level of court that saving money and accumulating wealth is a permitted use of trust funds in certain cases.
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