estate planning Archives - Baker & Company

Dependant Relief Claims Explained

Common-law spouses retain a right to claim a portion of their spouse’s estate in the form of a dependant’s relief claim. These claims are governed by Part V of the Act. In order to make a successful claim for dependant’s relief, a spouse must be able to demonstrate that they were in a common-law relationship with the deceased at the time of their death. In cases where the deceased did have a will, the spouse must also establish that the will failed to provide adequate provisions for their ongoing support.

Once the spouse has established their right to a claim, the court must then determine the amount of the award. To do this, the court will review a number of factors set out under s. 62, including the following:

the dependant’s current assets and means;

the dependant’s capacity to contribute to their own support;

the dependant’s age and physical and mental health;

any agreement between the deceased and the dependant;

the claims of any other dependant of the deceased; and

the length of time the spouses cohabitated.

These are just some of the factors enumerated in the Act. The full list can be viewed under s. 62(1) of the Act.

A Recent Example

A recent decision of the Ontario Superior Court examined a classic scenario of a common-law spouse’s claim for dependant’s relief. In the case at hand, the deceased died intestate and was survived by an adult child and his common-law spouse. Under the laws of succession, the entire estate, valued at $2,851,125.77, would have gone to the daughter of the deceased. The common-law spouse brought a claim for dependant’s relief, seeking an award of half the value of the estate. Specifically, she sought an absolute transfer of the farm property where she resided with the deceased, which was valued at $580,000.00. In addition, she sought to keep all funds and assets she had received to date, which totalled approximately $570,000.00 and then a further cash payment of approximately $275,000.00. This would leave both the applicant and the respondent with approximately equal shares in the estate.

At the time of her spouse’s death, the applicant was 73 years old. She had no physical or mental health issues and was not employed. She resided on a farm property owned by the deceased, where she had lived and worked since 1991. She had originally met the deceased when he hired her to work as his housekeeper, however, a romantic relationship developed over time. Tax records indicated that the pair had declared themselves to be common-law spouses beginning in 1999.

Records showed that the applicant had paid into the household expenses over the years, including veterinary bills, small tools for the farm, home appliances, and food and clothing for the couple.

The court examined what the applicant would require in order to maintain her own care, with the contemplation of the applicant eventually relocating to a one-bedroom accommodation in a nursing care facility. Relying on expert evidence, the court found that the applicant would be likely to suffer a shortfall if she was entitled only to the assets already in her possession. Given that the estate was sizeable enough to provide for the applicant, the court found that the deceased had failed to provide adequate support.

Once the applicant had successfully established a claim against the estate, the court then turned to the amount. While the court considered providing a life estate in the farmhouse for the applicant, it found that there was a contentious relationship between the applicant and the deceased’s daughter, and a life estate in the home would prolong the need for the parties to interact with each other. Under the circumstances, the court held that both parties would be better served by ordering a transfer of the farmhouse to the applicant.

The court ultimately found that a judicious spouse would have provided for the applicant’s care and her ability to live in relative comfort for the remainder of her life. Given that, the court ordered that the applicant keep the assets already in her possession in addition to the transfer of the farmhouse, and also awarded a further payment of approximately $275,000.00. The applicant received everything she had requested, which amounted to half the value of the estate.

Takeaways

This case serves to illustrate how the law can help to make up for a shortfall when a person dies without properly providing for a dependant. Just because a person has been left out of the will, or in a case where there was no will at all, it does not mean that they are without options. If you find yourself facing a similar circumstance, seek the advice of a skilled wills and estates lawyer.

At Baker & Company, our Toronto estate planning lawyers can help you establish an estate plan tailored to your needs, no matter your current family status. We have extensive experience and expertise in providing you with estate planning advice and implementing your desired plan. Should you find yourself in the position of challenging an existing will or estate, our lawyers can also represent you through the litigation process. Call us at 416-777-0100 or contact us online for a consultation.

Estate Planning Concerns for Later in Life Relationships

Most people understand the importance of putting a carefully considered estate plan into place in order to ensure that one’s wishes are carried out with respect to the distribution of their assets after death. Married and common law couples generally plan their estates so that their assets pass to their spouse after death, who will then in turn pass all of the couple’s assets onto the couple’s children, if they have them.

When a young couple marries or moves in together before having children or acquiring significant assets, estate planning is generally not a complicated prospect. When two people share children and build their wealth together from the start, each party usually has similar long-term goals with respect to their estates and beneficiaries. However, when couples marry or enter into a common law relationship later in life due to divorce or the death of their first spouse, estate matters can become considerably more complicated. Each person is more likely to have grown children, established assets and other interests that were built before the relationship began. This can drastically affect the estate planning process in multiple ways.

How Much to Leave to a Surviving Second Spouse

When an estate plan involves a second spouse or common law partner as well as grown children from a previous relationship, determining the best method for the distribution of assets is key. The risks of leaving everything to the surviving spouse with the intention that they will then leave assets to one’s children after their death are numerous. The surviving spouse may not respect the intention of the original plan, gifting funds during their lifetime to their own children, charitable organizations or elsewhere, leaving little or nothing to gift to the children of the deceased when they pass. The surviving spouse may also enter into a new relationship, one that may involve other children and different or shifting financial priorities.

Aside from the potential for one’s assets to be depleted by the surviving spouse, there is also an emotional component to consider. Grown children may feel hurt, angered or forgotten should a spouse who is not their parent inherit the entire estate in favour of them, even if the intention exists that the spouse will, in turn, leave assets to the children upon their death. This option leaves a lot of room for uncertainty, which is often what a testator is most trying to avoid when making an estate plan.

Another factor to consider is the taxability of certain assets. Assets such as Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), and Tax-Free Savings Accounts (TFSAs), may or may not be subject to taxes, depending on the beneficiary. Each of these assets can be transferred tax-free upon death to a surviving spouse, however, if they are left to children of the deceased, all will face tax penalties. This may not be a reason to leave these to a spouse rather than to one’s children, but if making decisions on which assets to leave to whom, this should be taken under advisement.

Leaving too little to a second spouse or partner is also a concern, particularly when there is a significant disparity in the parties’ assets and income. Leaving too little may result in insufficient assets, and the surviving spouse may find themselves needing to postpone retirement or facing the need to significantly curb spending in their later years.

A qualified estate planning lawyer will review all aspects of your financial situation and advise on how to determine a happy medium to the benefit of all family members over the long term.

The Matrimonial Home

When a couple shares a home, traditionally they will both go on title as joint tenants, which means that upon the death of one spouse, full ownership will transfer by right to the surviving spouse. When a couple each have children from previous relationships, they may choose instead to own the home as tenants in common. This means that they can allocate the percentage of ownership between them (often a 50/50 split) and when one spouse dies, their share in the property will be distributed according to their will. However, this can result in an awkward ownership split between a surviving spouse and the deceased’s children. Depending on family dynamics, this option could be just fine, but it may cause problems if any tension exists between the surviving spouse and the deceased’s children.

Another option that couples sometimes choose, particularly in common law relationships where the home is solely owned by one party, is for the spouse who owns the home to designate a life estate in the home for their surviving spouse or partner in their will. This option guarantees the right of the surviving spouse to remain in the home for their lifetime (a right not inherent in common law relationships), with the property ownership transferring to the owner’s children upon their death (or sooner, if the surviving spouse enters into a new relationship and/or chooses to leave of their own volition).

Obtaining Independent Legal Advice

When planning an estate involving later in life spouses or common law partners and children from previous relationships, it is advisable that both parties retain their own independent legal counsel. This will ensure that each party receives advice designed to protect their individual interests and allow the design of a plan that adequately addresses each party’s stated intentions.