It is easy to postpone estate planning for far too long, but November beckons us to prioritize a crucial aspect of our future. It can be overwhelming, intimidating and time-consuming, however, drafting a will is an important task every person should complete sooner rather than later.
This blog aims to demystify estate planning and emphasize some high-level priorities when drafting a will. “Make a Will Month” is a call to action and an opportunity to become familiar with your estate needs and the important factors to consider when drafting a will. Specifically, Ontario laws may limit a testator’s freedom with respect to the distribution of the assets in their will. These statutes provide essential rules one must consider when drafting a will.
The Succession Law Reform Act (also referred to as the “SLRA”) governs the distribution of a deceased person’s estate when there is no valid will. It outlines rules for intestate succession and determines how assets will be distributed among surviving family members. The Succession Law Reform Act prioritizes the spouse, followed by children and then other relatives. If no immediate family exists, the estate may go to the government. The Succession Law Reform Act aims to provide a systematic and fair process for the distribution of assets in the absence of a will, ensuring a structured approach to intestate succession in the province of Ontario.
Specifically, Part V of the Succession Law Reform Act operates to protect the deceased’s financial dependents from an inadequate provision of assets by the deceased. This section applies whether the deceased died with a will or intestate. In other words, a claim can be made under this section for dependent support, regardless of whether a will was drafted. To do so, three criteria must be satisfied, specifically:
- The individual claiming dependent support must stand in the right of relationship to the deceased, i.e., married or common-law spouse, parent, grandparent, child, grandchild, or sibling of the deceased;
- Prior to death, the deceased must have been providing support to the individual claiming support or must have had a legal obligation to do so; and
- The deceased did not make adequate provision to do so.
Ontario courts consider the ambit of “adequate provision” heavily, and the factors for which an adequate provision has not been made will be determined by factors such as budgetary needs, family lifestyle, and moral considerations.
The important takeaway is that the drafter must consider the needs of their dependents before drafting the will. Otherwise, the dependent may be able to claim under the Succession Law Reform Act for additional support. Such a claim could cause financial stress on the estate and emotional stress on the family.
The Family Law Act (also referred to as the “FLA”) addresses family-related legal matters. It governs marriage, divorce, property division, spousal and child support, and custody arrangements in Ontario. The Family Law Act also promotes fair resolution and children’s best interests in family disputes, emphasizes equal responsibilities, and recognizes the importance of spousal and child support.
In the event of a spouse’s death, the surviving spouse has the option to choose to receive their entitlements contained within the will, or they may elect to receive an “equalization payment” under the Family Law Act. If the surviving spouse chooses the latter, the will entitlement is forfeited, and the will is administered as if the surviving spouse had predeceased the testator. It is important to note that this right can be waived by contract.
The operation of the equalization claim is a paramount consideration when drafting a will. Individuals should consider whether they wish to include certain assets in the will, as it can have significant consequences on the estate. Depending on the value of the equalization payment in each case, the inheritance subsequently passed to the children of the deceased may be exposed to an equalization claim by a respective spouse. However, there are a variety of strategies to avoid this risk, such as:
- The general principle that gifts and inheritance received during the marriage are excluded from the calculation of a recipient spouse’s net family property.
- The income derived from such gifts and inheritance is also excluded if the donor expresses this intention.
- If the gift or inheritance is received prior to the marriage, the value at the marriage date will represent a deduction in calculating the child’s net family property at a later time.
- There is always the option to establish a testamentary trust for the child to provide greater protection of the assets.
The specific strategies require careful consideration with expert legal counsel. Either way, effective estate planning requires scrutiny of how the equalization payment can affect the assets distributed by the will.
The trusted estate lawyers at Bader Law can help with a wide range of wills and estate matters, including drafting a will, updating a will, and assisting with probate guidance and estate administration. With care and compassion, our team of estate planning and administration lawyers will ensure your will meets the needs of you and your loved ones. Contact us by phone at (289) 652-9092 or reach us online to discuss your estate needs.