“I know my father wanted to leave me something after he died. Why does my stepmother get everything?”It is not uncommon for a lawyer to meet with a new or potential client who raises this issue, especially in the context of a blended family. Why does the law prioritize your parent’s spouse (who is not your parent) over you, the deceased’s own child? There is a public policy reason behind this: the legislature seeks to provide for the financially dependent widow or widower who relied on their late spouse for support. The law is also slow to evolve; in a “traditional” nuclear family, children are often shared by the couple and likely to inherit under the surviving spouse’s estate. The law may also view an adult child of the deceased as more capable of caring for themselves than an aging surviving spouse. For whatever reason, protections for spouses in estate matters remain in place through the preferential share given to spouses under intestacy and the election under the Family Law Act (FLA), as set out below.
(1) The Preferential Share Under Intestacy
If someone dies without a Will in Ontario, then their estate goes out on intestacy. As part of this legislative scheme, the deceased’s spouse is entitled to a preferential share of the estate. As prescribed by regulation, the “preferential share” of an estate in Ontario increased in 2021 to $350,000. However, if the deceased died prior to March 1, 2021, then the preferential share is only $200,000.[1] The preferential share is given to all legally married spouses, regardless of the length of the marriage. Here’s how it works: if an estate’s net value is less than $350,000, then the entirety of the estate will go to the deceased’s spouse, regardless of any children that the deceased may have.[2] If the net value is more than $350,000, then the deceased’s spouse will get the first $350,000, or the preferential share, of the estate.[3] The “net value” of an estate means the value of an estate after the debts, funeral expenses, and expenses related to estate administration are paid.[4] The net value also includes the proceeds of any insurance policies payable to the estate, such as mortgage insurance.[5] Assets remaining in the estate after the payment of the debts and preferential share are called the residue. If the deceased has a spouse and no children, then the entirety of the residue will go to their spouse. If the deceased has a spouse and one child, then the spouse and the child are each entitled to one-half of the residue. If the deceased has two or more children, then the spouse is entitled to one-third of the residue and the remaining two-thirds are divided equally among the deceased’s children.[6] All children of the deceased, whether shared with the spouse or not, are entitled to inherit under intestacy. If the deceased has no spouse or children, then their estate will go to their nearest relative, as described in section 47 of the Succession Law Reform Act (SLRA).[7]Separated and Cohabiting Spouses Excluded
The preferential share is only available to those who qualify as “spouses” under the SLRA. This definition is limited to married spouses and excludes cohabiting spouses, regardless of how long a couple has been together.[8] In January 2022, the SLRA was also amended to exclude spouses who are separated from the deceased at their time of death.[9] A spouse will be considered separated from the deceased person for the purposes of the SLRA if:- before the deceased's death,
- they lived separate and apart due to the breakdown of their marriage for a period of three years immediately prior to the deceased’s death;
- they entered into a valid separation agreement under Part IV of the Family Law Act;
- the court made an order on their rights and obligations following the breakdown of their marriage; or
- a family arbitration award was made under the Arbitration Act, 1991 with respect to their rights and obligations following the breakdown of their marriage; and
- at the time of the deceased’s death, they were living separately and apart as a result of the breakdown of their marriage.[10]
What if the Deceased was Only Partially Intestate?
If a deceased’s Will did not deal with the entirety of their property, then they are said to have died partially intestate.[11] Under partial intestacy, the deceased’s spouse remains entitled to a preferential share of the estate. Where they were entitled to nothing under the Will, or less than the preferential share, then they are entitled to the remaining amount of their preferential share from the intestate property. For example, if a spouse receives $100,000 under the Will and the estate has $300,000 in intestate property, then the spouse would be entitled to $250,000 of the intestate property to make up their $350,000 preferential share. In contrast, if the spouse is entitled to more than the preferential share under the Will, then they will not receive any preferential share of the intestate property, which will go out under the normal rules of intestacy.(2) Election for Equalization
Under the FLA, upon someone’s death, their surviving spouse has the option to choose between taking their share under the Will or under intestacy and opting for equalization of net family property (“NFP”).[12] NFP includes the value of all the property that a spouse owns at the date of their death, excluding their debts and liabilities, and property, besides the matrimonial home, owned by a spouse at the date of marriage.[13] In the equalization of NFP, the spouse whose NFP is lower is entitled to one-half of the difference between their NFP and their spouse’s.[14] This equalization only goes one way when it is triggered by one of the spouse’s death; an estate cannot opt for equalization against a surviving spouse.[15] However, if a spouse elects for equalization, then they lose any gifts they were entitled to under their former spouse’s Will.[16] In addition, proceeds of any life insurance policy, pension fund, or property inherited through the right of survivorship will be credited against the surviving spouse’s entitlement to equalization.[17] In general, once an election is made, it cannot be revoked and the surviving spouse forfeits their right to challenge the Will.[18] However, courts can exercise their residual jurisdiction to revoke an election where it is required by the interests of justice. In Iasenza v Iasenza Estate,[19] the court set aside an election where the widow opted for election under the mistaken belief that she would receive more of her husband’s estate than the one-third granted to her under his Will; however, her equalization payment ended up being nothing. The Court set out the following factors to consider in their analysis:- Was the election filed as a result of a material mistake of fact or law made in good faith?
- Was there any responsibility or culpability on the part of effected parties in relation to the election?
- Was the notice of intent to seek revocation of the election given in a timely way and, in particular, how long after the six-month filing period was such notice given?
- Has the estate been distributed or would interested parties otherwise be adversely effected by a revocation of the election?
- Does the election result in an injustice to the surviving spouse in all of the circumstances?[20]
What Can You Do?
The SLRA and FLA demonstrate that the Ontario legislature favours a person’s spouse over their child when it comes to inheritance. Parents looking to leave an inheritance for their children can consider the following in their estate planning:- Make a Will. One of the best ways to ensure that your beneficiaries are provided for after your death is to lay out your intentions in your Will. Your Will can include specific bequests to your spouse and children.
- Create a Trust. Another option is to place your assets in a trust for your spouse’s use, with the remainder of your assets going to your children after your spouse’s death. With a trust, you can implement conditions on how much your spouse can get from the trust at any given time. It also prevents your spouse from leaving your assets in their Will to someone else.
- Make Your Children Beneficiaries of Policies. Another way of providing for your children is naming them as beneficiaries of life insurance policies and retirement funds. As these assets pass outside of your estate, your spouse would not be able to access them.
- Add Your Child’s Name to the Deed. If you want to leave real property to your children after your death, you can add them to the deed as a registered owner in joint tenancy. Joint tenancy carries the right of survivorship. This means that when you die, the asset will pass directly to them without going through your estate.
Contact the Toronto Estate Lawyers at Derfel Estate Law
There are several things to consider when estate planning and preparing your Will. While it may be tempting to save costs by creating a Will without the assistance of a professional, the consequences can be serious for both your beneficiaries and estate. To learn how we can assist you with your estate planning or the administration of your estate, call our office at 416-847-3850 or contact us online.This blog was co-authored by David Derfel and law student, Leslie Haddock.
[1] See O Reg 54/95, s 1.
[2] Succession Law Reform Act, RSO 1990, c S26, s 45(1) [SLRA].
[3] Ibid, s 45(2).
[4] Ibid, s 45(4).
[5] Re Estate of Richard Lewis Crane, 2016 ONSC 291 at para 23.
[6] SLRA, supra note 2, ss 46(1)-(2).
[7] Ibid, s 47.
[8] Ibid, s 1(1).
[9] Ibid, s 43.1(1).
[10] Ibid, s 43.1(2).
[11] Ibid, ss 45(3).
[12] Family Law Act, RSO 1990, c F3, s 6.
[13] Ibid, s 4(1).
[14] Ibid, s 5(1).
[15] Ibid, s 5(2).
[16] Ibid, s 6(5).
[17] Ibid, ss 6(6)-(7).
[18] Bolfan Estate, Re, 1992 CanLII 8634 (ON SC).
[19] 2007 CanLII 23351 (ON SC).
[20] Ibid at para 25.
[21] Ibid at para 29.