In Dyjack v. Shaw, 2025 ONSC 1937 (“Dyjack”), the Honourable Justice Sanfilippo provided valuable guidance for Canadian estates with U.S. properties.
The deceased in Dyjack appointed her two daughters as co-trustees and equal residue beneficiaries of her estate. While administering the estate, the Applicant co-trustee learned of substantial unpaid gift taxes arising from a 2009 transfer of Florida property by the deceased to the Applicant as joint tenants, which totalled $121,163.23 CAD.
The Respondent co-trustee contended the estate was not responsible for the tax. She argued that 1) the deceased did not intend for the estate to pay the tax, 2) the tax was a charge personally payable by the Applicant as the beneficiary of the Florida property under section 32 of the Succession Law Reform Act (“SLRA”) and 3) the tax is nonetheless unenforceable in Canada.
Justice Sanfilippo rejected all three arguments.
First, His Honour found that the co-trustees had a duty to pay the just debts of the estate, which include unpaid personal debts of the deceased. The tax was such a personal debt.
Second, His Honour found that section 32 of the SLRA did not apply because, as a personal debt of the deceased, the tax was not a “mortgage” or “charge” on property governed by the SLRA.
Finally, His Honour accepted the Applicant’s expert evidence, which established that the IRS could enforce the tax against the trustees directly, creating potential liability for them. As such, the tax is treated as a just debt of the estate.