Bill 245 and predatory marriages in estate law

Bill 245 and predatory marriages in estate law

On March 2, 2021, Bill 245, the Accelerating Access  to  Justice  Act, passed  its  second  reading  in the Ontario legislature. There remains to be a third reading before the Act can receive royal assent, but from reading the Hansard debates, it is optimistic that Bill 245 will become law.

As wills, trusts and estates practitioners it is important to note these changes to the legislation – in particular, the change in legislation regarding wills and the marital status of the testator.

Marital status and the SLRA

Schedule 9 of Bill 245 has proposed amendments to the Succession Law Reform Act (SLRA).

The following are the proposed changes to be made to the sections in the SLRA relating to marital status:

  • It is proposed that 16, where a will is revoked by the marriage of the testator, is repealed.
  • An addition is proposed for 17 to add other instances  where  a  testator’s will shall be construed  as if  the  former  spouse had predeceased  the testator. Most notably, the proposal  for  s.  17  is to  include  spousal separation between married spouses to be construed as if the spouse had predeceased the testat or.
  • Following the theme of separation, the proposed addition of 43. 1 adds that intestacy rules do not apply in respect of any or all property if the person and the spouse are separated at the time of the person’s death.

The changes reflect the name of the bill as accessibility to justice is accelerated through the proposed amendments. This accessibility to justice is most notable in the proposed s. 16 revocation .

How changes promote accelerated access to justice

 Current Section 16:

Revocation by marriage 16 A will is revoked by the marriage of the testator except where,

  • there is a declaration in the will that it is made in contemplation of the marriage;
  • the spouse of the testator elects to take under the will, by an instrument in writing signed by the spouse and filed within one year after the testator’s death in the office of the Estate Registrar for Ontario; or
  • the will is made in exercise of a power of appointment of property which would not in default of the appointment pass to the heir, executor or administrator of the testator or to the persons entitled to the estate of the testator if he or she died intest ate .

As some estate litigation practitioners may have experienced, an unfortunate situation can occur

when an elderly testator marries a significantly younger spouse. Unless there was a declaration in contemplation of marriage, the elderly testator’s previous will is revoked, leaving the beneficiaries a difficult journey to regain their inheritance, and almost always at a cost. Unless a new will is created, the new younger spouse jumps to the front of the line and if a new will is actually created, it may be the case that the new will is borne from coercion or undue influence. This was the case in Banton v. Banton [1998] O.J. No. 3528.

Problems with current law as in Banton v. Banton

Banton is a classic example of predatory marriage. In Banton, 88-year-old George Banton met a 31- year-old woman named Muna Yassin, and they had”… formed a friendship, which quickly developed into a close attachment … .” After surgery for one of his many physical ailments, Banton’s doctor assessed and issued a Certificate of I ncompetence. Shortly after the declaration of incompetence, Banton, with Yassin, withdrew $10,000 from his bank account and attempted to cash more of his cheques.

When his children discovered the withdrawal and attempted withdrawals, they, as Banton’s attorneys for property, put everything  in a trust to protect his assets. The trust was created similar to Banton’s will executed in 1991. After the withdrawals were stopped, Yassin married Banton and he made a will that left everything to her.

Based on the evidence, the court found Banton’s will that left everything to Yassin to be invalid because he was incapable and it was procured through undue influence. Unfortunately for the children, the court found that the marriage was valid.

Predatory marriages

A problem with respect to capacity  is the  lower standard  required  for the  capacity  to  marry  as compared to the capacity to make a will or appoint a power  of attorney.  The act of marriage  may  be simple to understand and carry a lower bar for capacity (although when is love ever that simple), but there are still consequences to  marriage  that invoke  financial  repercussions  in  some  instances,  as seen above.

For individuals with less time – such as the elderly – marriage is extremely problematic as marriage more than likely revokes a will. For people with more time in their lives to  make a new  will, this is not as big of a problem as compared to older individuals (but everyone should endeavour to have a will

– see our previous article: Estate COVID problems part two: The importance of a will).

It is because of the revocation in s. 16 that makes the elderly extremely vulnerable to predatory marriages due to factors that include, but are not  limited to,  the deterioration  of the mind and body and loneliness . The elderly become likely targets  for  parasites  that  need to  only  come into a  senior’s life for a short period of time to steal a large amount of money from rightful beneficiaries. Yassin was married to Banton for just over a year and a half.

Why the new law is better than status quo

If the revocation by marriage is repealed, then the Banton estate would not have lost money to a predatory marriage. They would have been successful in the will challenge, and Banton would not have died intestate. He would have died subject to his true testamentary intention as in his previous will where he was capable. His five children and 18 grandchildren would not have given up a part of their inheritance to an outsider.

From the Hansard, MPP Robert Bailey addressed the floor and advocated for Bill 245. He stated the bill’s intent to combat predatory marriages through the s. 16 amendment “the proposed changes in Bill 245 that will benefit seniors who may enter predatory marriages.”

This amendment may not rid Ontario of predatory marriages, but it is a good place to start .

Estate COVID problems part two: The importance of a will

Estate COVID problems part two: The importance of a will

A common  theme executors  and loved ones are faced with is when their loved one dies without a will, also called dying intestate. In the first article in this series we wrote regarding the intestate succession process when a person dies without a will. Many issues arise when one dies intestate and family members may find themselves in litigation.

As of today, COVID-19 has killed over 2.35 million people worldwide. In these unprecedented times, it is imperative to consider estate planning so loved ones are left with a clear plan as to the administration of an estate and can take advantage of any tax savings. A will is a crucial aspect of estate planning.

COVID-19: Remote execution of will

Prior to the COVID-19 pandemic, a testator was required to have their will witnessed in the physical presence of two people. The government of Ontario responded to the COVID-19 pandemic with the regulation for Signatures in Wills and Powers of Att orn ey. This regulation allowed for the use of videoconferencing for witnessing and allowed for signatures to be signed in counterpart .

It is important to note that virtual  witnessing  is only  permitted  for a specific time period, which has been extended numerous times. Currently, the use of virtual witnessing has been extended to March 21, 2021 and it will likely be made permanent with the new legislation brought by the Attorney General, Doug Downey.

Affidavit of Execution

The Affidavit of Execution of Will or Codicil Form 74. 08 has also been amended effective Jan. 1, 2021. Here is the new form.

Advantages of a will: Estate trustee appointed

The advantage of drafting a will, other than having a clear roadmap of how assets should be handled and distributed, is the appointment of an estate trustee. In fact, the will itself (considered a ” living document “) bestows the power to the estate trustee to administer the estate.

Is probate required? 

It is a misconception that probate (applying for a Certificate of Appointment of Estate Trustee)  is always required. There are many scenarios where probate becomes necessary, for example, to deal with real property (depending on how title is held). Another example is when a person dies without a will, and therefore, there is no document giving them the authority to administer the estate.

Depending on the scenario, probate may not be necessary to administer an estate. There is a notable savings in both legal fees and the Estate Administration Tax (EAT) if probate is not needed.

If  an estate trustee decides to  apply for probate (with or without a will), they  will be required to pay an EAT which is 1.5  per cent of the value of the estate (defined as “all assets owned by the estate”). It is calculated as $15 for every $1,000 of the value of the estate for estates over $50,000.

As of Jan. 1, 2020, there is no EAT for estates valued at less than $50,000.

Exceptions: Primary/secondary will

 There are a few exceptions to the EAT encompassing the value of the estate –   which is when having an estate planner is an asset. As per the government website: “If the deceased had multiple wills and the court issues  a Certificate  of Appointment  of Estate Trustee  with a  Will Limited  to  the  Assets Referred to in the Will, only assets included in that specific will can be included in the value of the  estate .”

There are instances when a person dies  with  more than one  will, known as a  primary  and secondary will. This is done  so that the primary  will may  be probated  (and taxes paid on these  assets)  whereas the secondary will is not probated (taxes are not paid on these assets).

This is usually done when there is a large estate and certain assets require probate to be dealt with upon death, such as real property, and others do not require probate but require direction as to who should inherit them, such as artwork, vehicles, Royal Daulton collectibles.

Not taxed: Real property outside Ontario

 There are assets that are not subject to EAT such as: real properties outside Ontario, a beneficiary designation in a life insurance policy, RRIF, RRSP, TFSA (this is because it passes outside of the estate) and debts owed by the deceased.

This is a general overview of some key takeaways regarding the importance of an estate plan and the benefits of a will. These issues are even more important during COVID-19 and individuals may wish to take advantage of virtual options while they last.

There are some certainties in life and, while no one likes to think about them, they remain: death and taxes.

This is the second of a two-part series.

Estate COVID problems: The rogue trustee

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

Estate COVID problems: The Rogue Trustee

A common theme in an administration of any estate is the breakdown of relationships between family members. Sometimes the estate trustee takes it upon themselves to make distributions that are not pursuant to the will or intestacy laws. It could be because they feel that they deserve more money over the other beneficiaries. Whatever the reason, an estate trustee should never endeavour to change the distribution as set out  in a will or on intestacy laws without a court order.

Beneficiaries of a will or under intestacy who have not been given their inheritance because of an estate trustee’s conduct have recourse. This series of articles looks to address the problem: “I  am a beneficiary  of a will but I have not received my gift,” or “what do I do if the  estate trustee  is not distributing according to the will?”

No probate

If the beneficiary learns that they will not be receiving a gift before the estate trustee has applied for probate, then the beneficiary may file to the court a Rule 75.03 Notice of Objection to  the  estate  trustee’s appointment. Essentially, the beneficiary would object to the estate trustee from obtaining the certificate of appointment because of the estate trustee’s conduct or conflict, which would interfere with them being able to act impartially among all beneficiaries (this is the even-hand rule).

The role of the estate trustee requires the trustee to serve the  estate. If the estate trustee is unable to act neutrally and honour the last wishes of the deceased, or the laws of intestacy, then the beneficiary has a strong case to seek the removal of the estate trustee . Just because an estate trustee is a creditor does not mean they cannot act neutrally . Should an estate trustee be deemed by the court to have breached their fiduciary duties, they may be penalized  with partially or fully reduced compensation, and in some instances forced to pay back the improper distributions to the estate with interest.

Duty to account

If the estate trustee has been appointed, either they obtained a Certificate of Appointment with or without a will, or were appointed in the will, then they have a duty to account to the  beneficiaries. This means that the estate trustee must keep accurate records of the assets and transactions of the estate. The beneficiaries are entitled to see all the monies going in and out of the estate.

If  the estate trustee is delaying distribution  because they do not  want to  distribute to a beneficiary, or if they are not reporting anything to a beneficiary, or if a beneficiary suspects that they are not getting what they are owed, then the beneficiary can obtain an order to compel the estate trustee to pass their accounts (Rule 74. l S(h)) . If the beneficiary disagrees with the accounting, then they can file and serve a Notice of Objection to the Accounts (Rule 74.18(7)).

Other options include s. 37 of the Trustee Act, which states that a party may apply for an estate trustee to be removed or Rule 75 . 06 where the beneficiary may apply for the directions of the court.

The bottom line is if someone is a named beneficiary in a will or on intestacy, then they have the right to claim their inheritance.

What is different with COVID?

Luckily, the courts have adapted with the times and are hearing matters via Zoom. Law offices have transitioned to providing services to clients virtually. Though the medium is different, the law remains the law.

More on COVID-era estate law in part two of this series.

Lawyers Care about Long-Term Care

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

Lawyers Care about Long-Term Care

There has never been a time where a light has shone so brightly on long-term care homes (LTC), and it is not a pretty picture. The COVID-19 pandemic has exposed the system’s struggle to meet the most essential needs of residents. At a time where the situation is going from desperate to dire, the Ontario Bar Association’s Elder Law Section has established a COVID-19 Working Group (Working Group) to closely examine the important legal issues facing vulnerable older Ontarians through the pandemic.

As one of the newest additions to the OBA, the Elder Law section was established in 2017 with a goal of furthering the interests of older adults and the legal practitioners who serve them. With a particular focus on the situation in LTC, the objectives of the Working Group include advocating for improvements to laws and regulations impacting LTC to better protect their vulnerable populations. It is time to better this system.

It is widely recognized that there are issues with regulation, supervision and accountability which directly impact the well-being of residents in LTC. These issues, while not new, have been thrust into the spotlight by the pandemic. Lawyers practising in the emerging field of elder law have a critical role to play by sharing the frontline experience of the bar and assisting government in identifying practical and useful legislative and regulatory reform to respond to the impacts of the pandemic on the older population, particularly those in LTC.

In July, the Elder Law section delivered a letter to the minister of long-term care and minister of seniors and accessibility, advocating for immediate implementation of the following recommendations:

  1. Ensuring compliance with the Residents’ Bill of Rights;
  2. Resuming unannounced annual Resident Quality Inspectors in all LTCs;
  3. Safeguarding residents’ right to give informed consent or refusal to treatment and the delivery of personal assistance services;
  4. Accelerating the completion of the LTC rebuild program; and
  5. Ensuring sufficient life safety measures are installed in LTCs.

We are looking forward to hosting a panel discussion on Dec. 9, 2020, on Safety in Long-Term Care: Making Sense of the Gillese Report and Government Response, and welcoming Ontario Justice Eileen Gillese herself as one of our presenters. Our work on a submission to the Long-Term Care COVID-19 Commission (the commission) also continues.

The issues plaguing LTC are wide-ranging and include:

  • There is evidence of overcrowding, understaffing, shortage of personal protective equipment (PPEs), outdated facilities, poor regulation and lack of job security and funding provided by the provincial and federal government in LTC.
  • The challenge with the upsurge of COVID-19 cases is that Canada and the Ministry of Long-Term Care for Ontario do not have consistent standards or policies in place for nursing homes.
  • While health-care providers have an obligation to care for their patients, they are unable to do so due to untimely interventions, minimal guidance and poor procedures.

The commission’s first interim recommendations, released on Oct. 23, 2020, are aimed primarily at increasing staffing, strengthening health-care sector relationship and collaboration and improving infection prevention and control measures.

As the second wave of COVID-19 continues to surge in Ontario, we must pull together to do the work that needs to be done to protect our vulnerable senior population. This is an issue that impacts many Ontarians today, and it will affect many more people in the future. The OBA’s Elder Law COVID-19 Working Group will continue to advocate for the legal changes necessary to achieve this goal. For more information, visit oba.org/sections/elder-law.

How you can learn conflict resolution from Harry Potter

 

In Harry Potter, J.K. Rowling’s iconic seven-part fantasy series, the titular character studies at an English boarding school for wizards called Hogwarts School of Witchcraft and Wizardry, where he learns the magic he needs to navigate the wizarding world and defeat the evil Lord Voldemort. Bernard Mayer’s Wheel of Conflict and Resolution, which contains the five themes of communication (culture)emotions (power)structure (personality)history (data) and values, is reflected in the relationships between the characters in Harry Potter.

While the wizarding world and its characters are fictional, there are many lessons that can be gleaned from this series. The conflict and friction between “good” and “evil” bubbles to the point of a war in the seventh novel. Mayer’s Wheel of Conflict applies to the conflict. The overarching themes of culture, power, personality and data will be looked at to see how they play a role in explaining how the conflict grew into a war, and what could have been done differently to avoid this outcome.

Lord Voldemort is the villain in the novel and his main tactics of rising to power are to kill or intimidate others. Albus Dumbledore is the headmaster of Hogwarts School of Witchcraft and Wizardry and, along with Harry, Dumbledore is also the hero. Both Lord Voldemort and Dumbledore are said to be the most powerful wizards of all time, but each uses their power for different purposes.

CULTURE (COMMUNICATION)

Mayer bluntly says: “We are imperfect communicators.” Nothing more could be true in the entire Harry Potter series. Communication falls squarely under Culture as this is a factor that directly affects communication.

An aspect of communication that directly impacts Harry’s ability to resolve conflict is his own personality and biases. Notably, there is conflict between Harry and Severus Snape, who is a professor at Hogwarts and head of Slytherin. Slytherin is the house at Hogwarts for those who are Dark Arts followers. Voldemort was in Slytherin. Snape was a Death Eater and had the Dark Mark on his forearm, but he has claimed to repent.

As Mayer says, “we frequently rely on inaccurate or incomplete perceptions, form stereotypes, and carry into our communication conclusions drawn from former interactions or experiences.” Snape spies on Voldemort and pretends to be a Death Eater, and as he becomes more entrenched in the Dark Arts, it becomes questionable which side he is on. When Snape kills Dumbledore, it is implied that Snape is on Voldemort’s side.

However, as revealed at the end of the seventh book, Snape is good. Dumbledore is dying and he asks Snape to kill him so Snape can become Voldemort’s right-hand man and continue spying on Voldemort. This shocking twist shows the importance of communication and the issue of stereotypes. Overall, it is crucial that individuals overcome the culture barriers that lead to communication issues. We seldom blame our own communication shortcomings as a contributing factor of the ensuing conflict.

POWER (EMOTIONS)

As Mayer says, “emotions are the energy that fuels conflict.” The handling of emotions in a conflict can be tricky, as Mayer cautions against people venting their emotions. Instead, he states that the wisest course is to contain emotions until there is a safe time for them to be vented. In fact, this may be the key to resolving conflict. When Hogwarts is being run by the Ministry leader, Professor Umbridge, who refuses to teach Defence against the Dark Arts despite the rise of Voldemort, Harry first openly questions Umbridge’s authority. The intense feelings of hatred Harry felt toward Umbridge and the emotional turmoil of being called a crazy liar could have led him to spin out of control.

Rather, Harry follows Mayer’s approach and lets his emotions out in “safe increments” by starting Dumbledore’s Army. This is a group he leads which teaches some students Defence against the Dark Arts in a safe space (in the Room of Requirement). This knowledge was key to Harry and his friends winning a battle against the Death Eaters at the end of fifth book.

 

PERSONALITY (STRUCTURE)

The structure in which the issue develops is another source of conflict. As Mayer elaborates, these structural components of conflict include resources available, legal requirements, decision-making processes, and physical settings. The example provided is litigation, which Mayer says is a structure that exacerbates conflict and makes compromise difficult. Another example is voting, where the issue tends to become polarized and constructive communication may become difficult as candidates wedge issues to differentiate themselves from their rivals. The approach to campaigns increases divisiveness on complex issues such as gun control, healthcare or national security.

The structure of the wizarding world contributes to the rise of Voldemort in many ways. The Ministry’s control of the main newspaper, the Daily Prophet, allows them to communicate their own agenda to the masses rather than what is actually happening. Before Voldemort takes full control of the Ministry, the Ministry still under-reports the deaths and misleads the wizarding world regarding their efforts to stop Voldemort. The Ministry even imprisons a person as a “Death Eater” even though he is not one. The Ministry wanted people to think they were doing something about the rise of Voldemort even though their efforts were not enough to prevent a war. The Ministry’s structural issues allowed Voldemort to gain power and followers.

DATA (HISTORY)

Dumbledore would agree with Mayer that “conflict cannot be understood independent of its historical context.” This is because Dumbledore spends a great deal of his time before his demise showing Harry Voldemort’s past to build his own psychological profile of Voldemort. Harry asks at one point: “Sir…is it important to know all this about Voldemort’s past?” Dumbledore says, “Very important, I think.” Mayer says the history of participants in a conflict as well as the system in which the conflict is occurring and the issues themselves has a “powerful influence on the course of conflict.”

It is through learning about how Voldemort came to power and his upbringing that Harry understands how to resolve the conflict and defeat Voldemort. Likewise, through Harry learning about his own past, he begins to understand the issues in the conflict. This includes the prophecy, where a coming boy would have the power to vanquish Voldemort. Once Voldemort hears the prophecy, he goes to kill Harry who he believes is the coming boy. Voldemort kills Harry’s parents but could not kill Harry. In the effort to kill Harry, Voldemort marks Harry as his equal and loses his powers. This historical knowledge is crucial for Harry to understand that he is in fact the “Chosen One” as widely publicized.

CONCLUSION

Mayer’s points of conflict along the wheel of conflict should be used as a framework to assist us to understand a conflict. We learn how a conflict can be affected by communication, emotions, structure, history, and values. It is also important to address conflict early before it results in catastrophic consequences. Voldemort is a symbol of a leader who is focused on being the most powerful wizard and who uses rhetoric that divides the wizarding world. By dividing and instilling fear in society, Voldemort is able to build an army of followers and gain power and control. It is crucial to understand that conflict is exponential and requires more than one person to fester into something more than mere disagreements, and just as Voldemort’s catastrophic rise didn’t happen overnight, the conflicts that are given time to develop regularly transform into disaster. As Dumbledore says, “It is a curious thing, Harry, but perhaps those who are best suited to power are those who have never sought it.”

 

PART 2: Gap in the law: Exposure to your ex even when you have a will

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

Gap in the law: Exposure to your ex even when you have a will

In part one of this series we discussed the significant and often unexpected problems that can arise when a separated spouse dies without a will. We noted how such discussions are important given the significant proportion  of  Ontarians who simply have not executed a will.

In part two, we would like to talk about another “cohort” of separated Ontarian spouses – those who have a will but have yet to update their estate plan following separation. As you can imagine, this situation, too, is one that can produce unintended and frankly messy results if such   spouses were to die while separated.

The period of spousal separation is a difficult one for innumerable reasons

  • emotional, familial, financial and legal (to mention just a few). What’s more is that separated spouses become stressfully encumbered with the discussions and responsibilities surrounding the agreement to separate and the effect this will have on their lives, families and assets. Suffice it to say that ideas about “What will happen when I die?” are not always high  on the mind in such tough circumstances.

And yet, the effects of dying during a period of separation without having updated your estate plan can create immense and unintended problems.

Many Canadians assume that the act of separation in itself triggers legal changes to their will and estate plan. This is incorrect. In Ontario, the Succession Law Reform Act (SLRA) automatically revokes gifts in a will to former spouses upon a subsequent divorce, and such former spouses are deemed to have predeceased the testator who made the will. But, again, they apply to married couples who have formally divorced , and not separated spouses. A couple choosing to separate is distinct from the obtaining of a formal divorce and will have no impact on your will .

Notably, any gifts in your will to married-but-separated spouses or to former common law spouses remain valid after separation.

Generally, such gifts can only be revoked: by executing a new will removing the gi ; by executing a separation agreement which clearly and cogently addresses rights regarding  each other’s estates;  or the obtaining  of a final divorce. Of these options, the most effective (and very likely the quickest) way to prevent your separated spouse from taking under your now outdated will is to make a new one.

What to do

You can change your will really at any time following separation – you do not have to wait for a separation agreement to be executed and/or for property claims by your former spouse to be finally resolved.

That said, updating your will to remove your spouse may not completely disentitle him/her from making claims against your estate upon your death. You should be aware that:

  • In Ontario, your separated spouse may continue to have a claim against your estate if you have not yet come to a settlement regarding your family property. If you are still technically married to your spouse upon death, he/she may, for instance, make an equalization claim against your estate under the Family Law Act. Generally, this would entitle him/her to receive from your estate as if you had been divorced immediately prior to your death by using the net family property calculation, which generally aims to give the surviving spouse one-half of the “value of the marri ag e.”
  • If your updated will leaves your estate to beneficiaries other than your spouse, your spouse may still have a claim against your estate for any amount owing under an executed family property settlement, such as any divorce orders, separation agreements and other related agreements affecting property rights/claims (including claims for unpaid child/spousal support). In this case, your spouse effectively becomes a creditor of your estate, and any amounts remaining after the family property claim has been paid can then be paid out to estate
  • Separate from and/or in addition to the above, note as well that if your spouse is still financially dependent upon you at the time of your death, then under the SLRA, they may be entitled to bring a court application for a claim as a “dependant” by making a dependant’s support claim. Ontario law recognizes that you may continue to have financial responsibilities vis-a-vis your “dependents,” which can include spouses and former spouses not provided for (adequately or at all) in your will. Note that there exist clawback  provisions at s. 72 of the  SLRA to satisfy claims for dependant support, meaning that, suddenly, assets that had previously fallen “outside” of a deceased’s estate – like a life insurance policy –  may be “clawed back” for the purposes of support .

So, while it is critical to update your will upon separation, such an action does not “wash your hands” of existing or future (court-ordered) obligations  found to be owing to  your spouse after you have   died. These potential obligations should be discussed with your estate planners so that you may be better informed about how to plan for them (e.g. through such things as insurance products which  may be available to cover such obligations).

Of course, your will is but one component of your entire estate plan, which may likely include, among other things, beneficiary designations (e.g. RRSPs, TFSAs, life insurance), jointly held property with embedded rights of survivorship, powers of attorney and family trusts.

As with your will, the act of separation has no automatic legal effect upon how these other significant components of your estate plan are structured/designated, and separation agreements and family property settlements tend to deal  with some, but  not  all, of these  will substitutes. They  therefore also require immediate and individual consideration from you and your estate planner.

In many cases, addressing other components of your estate plan is just as critical as updating your will.

To provide one example, in study and in practice, we have come across too many unfortunate cases  in which someone dies with several beneficiary  designations still in favour of his/her separated spouse. Generally, court cases on point have consistently held that these existing designations will mean that the subject accounts/policies will pass to the separated  spouse –  something that is likely not in line with the deceased’s intentions . Even if you have signed a separation agreement that is intended as a full release of any and all claims that either spouse has against the other, as it may not contemplate or otherwise may not be enough to deny your spouse proceeds of an account/policy for which he/she is the designated beneficiary.

If you are going through a period of spousal separation – and this pandemic has unfortunately been host to an uptick of such relationship breakdowns –  it  is important to consider the meaning and effects of separation in the context of your estate plan. Separation is an especially tricky time, and  you and your family law lawyer should always work with an estate planner during this time to ensure your intentions are fully met – in life and in death.

This is part two of a two-part series.

Gap in the Law: Exposure to your Ex when you Don’t have a Will

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

Gap in the Law: Exposure to your Ex when you Don’t have a Will

The pandemic has put relationships to the test – and not all seems to be passing. Spousal separations are expected to increase, with a likely spike in divorces when things get back to “normal”. What most may not realize is that between the time when couples say “its complicated” to the time they divorce, their spouses are still entitled to substantial portions of their property on death if they do not prepare a will.

Now that we are reflecting on our mortality (and if you’re reading this, perhaps your relationships), we must look at how we may be able to protect our assets in that thorny stage between separation and divorce, if we were to die. This is especially important to discuss when it is also recalled that, quite unfortunately, most Canadians either do not have an executed will, or have not updated their existing will in light of new life circumstances.

Separation and Intestacy

Many Ontarian spouses considering or in the midst of a separation may be surprised to learn that such separation has no legal impact for the purposes of Ontario’s intestacy rules as outlined in the Succession Law Reform Act (SLRA). The SLRA defines a spouse as “either of two persons who… are married to each other”, and does not contain any provisions which contemplate separate treatment for spouses who are still married but living in separation. This is significant when it is kept in mind that, per Canada’s Divorce Act, spouses are generally granted a formal divorce after at least one year of separation. In effect, this means that, during this sizable period of time, separated spouses are given no special treatment under the SLRA.

As a result, if one of the spouses were to die without a will during separation, the surviving spouse retains significant entitlements to the deceased spouse’s estate. When an individual dies without a will in Ontario, the surviving spouse is entitled to the first $200,000 of the value of the deceased’s estate (this is called the spouse’s “preferential share”). Beyond the preferential share, the surviving spouse is also potential entitled to a “distributive share” of the remainder of the estate, if any. This amount varies depending on the number of children or remoter issue who have survived the deceased. Generally, though:

  • If the deceased had no descendants, the surviving spouse receives the remainder of the estate absolutely. 
  • If the deceased had one child (or descendents of a deceased child), one-half of the remainder of the estate will go to the surviving spouse, and the other half will go to the child (or the descendents, as the case may be).
  • If the deceased had more than one child (or descendents of deceased children), one-third of the remainder of the estate will go to the surviving spouse, and two-thirds will be divided between / among the deceased’s children (or their descendants if a given child is deceased, as the case may be).

The intestacy rule in the SLRA are both well meaning and much needed. They are there to provide Ontarians with a “statutory will” for situations – of which there are unfortunately many – where one dies without a will, or where a valid will does not include provisions regarding the distribution of the residue of the deceased’s estate (“partial intestacy”). While the rules apply a one-size-fits-all approach, it is reasonable for the legislature to provide significant entitlements to surviving spouse in this way, as this is roughly in line with how a deceased spouse would have preferred and indeed desired to provide for the person to whom they have been happily married.

However, these preferences or desires do not hold so well in situations of separation, where spouses may be likely to want more substantial portions of their estate to be distributed to other parties. In such circumstances, the one-size-fits-all intestacy rules can significantly undermine whatever the deceased spouse’s intentions may have been and increase the likelihood of estate litigation among actual or potential beneficiaries.

What to do?

In light of the above, the most obvious step for a separated spouse to take is to execute a will outlining their specific intentions regarding the distribution of their estate. However, the unfortunate reality is often that a spouse may die during a period of separation before they have had the opportunity to take this step. Situations like this may have indeed arisen during the COVID-19 pandemic.

Another step – and one which is very common – is for spouses to execute a separation agreement in which they release or vary their entitlements to one another’s estate. While this seems straightforward, and while courts tend to construe such provisions narrowly and accept them as valid releases only when they are “clear and ambiguous.” it somewhat goes without saying that such provisions do often lead to litigation. If you are contemplating entering a separation agreement, then, it is highly advisable that you do so in consultation with a lawyer. We have unfortunately come across too many circumstances in which separation agreements are drafted without any provisions regarding rights to a spouse’s estate upon an intestacy or include estate-related provisions which are too broad or ambiguous.

Contemplating and planning for one’s death is uncomfortable and often feels less immediate than so many other life obligations. To make matters worse, there are not enough effective and easily accessible resources for Ontarians to use to inform themselves about the importance of proper estate planning, even while they remain young. This article is meant to serve as a reminder that there are certain life situations in which these unfortunate trends can lead to great problems.

This is part one of a two-part series.

The Problem of Racist Wills in Ontario

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

The Problem of Racist Wills in Ontario

The common law affords immensely protects testamentary freedom—the ability of testators to dispose of their property upon death as they please. Indeed, the current state of Ontario law is that testators may dispose of property in their will in a given fashion for racist, xenophobic, or prejudiced reasons. This is why it is often colloquially noted that “racist wills” are possible in Ontario.

It has been several years since Ontario’s highest court reaffirmed the sanctity of testamentary freedom along the above lines in Spence v BMO Trust Company.[1] Nevertheless, in this current period of societal unrest in which many groups are seeking ways to better identify and address systemic racism, it perhaps becomes an ideal moment to re-discuss the ruling in Spence and the balance that the common law has thus far struck between testamentary freedom and discrimination. And, while the Ontario courts have so far rejected undermining the protection the common law affords to testamentary freedom in the context of private dispositions in a will, should there be legislative action in this sphere?

In Spence, the Ontario Court of Appeal (“ONCA”) delivered a strong statement in support of testamentary freedom.

The case stands for the proposition that:

 

  • It is not open to courts to scrutinize an unambiguous and unequivocal disposition in a will, with no discriminatory conditions or stipulations;
  • Even if a beneficiary (or a third party) claims that the underlying (discriminatory) motives of the testator undermine public policy; and
  • Third-party extrinsic evidence of the testator’s purportedly discriminatory motives are inadmissible in such circumstances.

 

Spence involved two key parties: the testator who is Eric Spence, and his daughter, Verolin, both of whom were black. Eric Spence had left his estate to his other daughter, Donna, and her two sons. A dispute arose when Verolin had a child with a white man. He ceased communicating with Verolin during the final 11 years of his life and also updated his will to completely exclude her.In his will, Eric specifically excluded Verolin, stating in it that “she has had no communication with me for several years and has shown no interest in me as a father.” Yet, Verolin and her father had in earlier times been quite close, while Eric and Donna had virtually no contact over many years.

Verolin brought an application urging the court to look deeper into the Spence family affairs. She argued that her exclusion from the will was for racist reasons and should therefore be void for public policy. A lifelong friend of Mr. Spence even testified that his true reason for excluding Verolin from his Estate was that the father of her son was white. Mr. Spence had apparently raged that he had no further use for Verolin and her “bastard white son”, and that he intended to exclude her from his will because of her life choice. These racist intentions were reported also by other family and friends who had knowledge of them from personal conversations with Mr. Spence. However, as the above suggests, they were not detailed in his will.

The Superior Court of Justice agreed with Verolin, finding that Mr. Spence’s reasons for disinheriting his daughter were based on clear racist principles, and that the provisions of the will offended “not only human sensibilities but also public policy”. The will was invalidated at first instance on this public-policy basis.

The case, though, was successfully appealed to the ONCA in 2016. Mr. Spence’s will of course did not contain any clauses that were expressly racist. As the will was unambiguous, the Court of Appeal held that there was no reason to consider any other, “extrinsic” evidence about Mr. Spence’s motivations. Mr. Spence’s testamentary freedom in such circumstances dictated that, when the will demonstrates clear and unambiguous intentions, these intentions should be respected during the distribution of the estate, even if their underlying motivations had been distasteful.

Practitioners in this sphere often mention that there are practical reasons why protecting testamentary freedom in this fashion can be described as necessary. For one, if arguments like Verolin’s were to succeed, estate litigation would surge because third-party extrinsic evidence about a testator’s underlying motivations would increasingly be admitted and scrutinized. Further, consider this hypothetical: What if a parent did not leave a gift … for an independent adult child because the child struggled with a drug addiction and was liable to squander his inheritance? Addiction is a mental illness and therefore the will may be found to be discriminatory on the basis of disability. Indeed, such situations may prove frustrating to testators and could constrain testamentary freedom in awkward ways.

Legislative action or investigation in this area would help to spur further advancements in Ontario’s ongoing battle to better identify and address systemic racism. A major reason why testamentary freedom is so assiduously protected in the courts is because of the centrality of property ownership in our society. We view the freedom to use and dispose of our property as a core fundament of our liberal democracy. And yet, maybe this is what makes legislative change in this area so desirable to consider.

If inroads could be made in this area so that such things as “racist wills” received less legal protection, then it could introduce major changes in the ways that property owners dispose of their property. In other words, introducing progressive improvements or recalibrations to some of the core foundations of our society, while difficult, may be a means of introducing the most impactful change.

In this current period, where we find ourselves as keen as ever to identify the various ways in which systemic racism is caused and perpetuated in our society, perhaps it is high time for our legislatures to review and reconsider the balance Spence struck between testamentary freedom and discrimination.

[1] 2016 ONCA 196 [Spence].

[2] Robin Spurr, “Spence v. BMO Trust Company: the case of the racist father”, Estate Litigation Blog (February 27, 2015).