Separation and Intestacy Rights – How Not to Benefit Your Spouse

September 11, 2018 Sayuri Kagami Beneficiary Designations, Estate Planning Tags: , , , , , , , 0 Comments

When a marriage breaks down, spouses often have an overwhelming amount of issues to consider. For many, all they want to do is figure out how to split up the assets (and kids) and move on with their lives. Sometimes, spouses will separate without formally divorcing. Although life after marriage may be the key consideration for most, separated spouses should also take time to consider what happens on their death and whether or not they want their spouse to share in their estate.

Draft a Will

The most obvious way of ensuring that your separated spouse doesn’t benefit from your death is to draft a Will. By setting out one’s intended disposition of assets, a testator will avoid the provisions of Part II of the Succession Law Reform Act, which provides for a share of the Estate to pass to the legally married spouse of a person who dies intestate. But remember, including a provision in the will that the spouse is to be excluded from inheriting is not sufficient to keep a surviving spouse from inheriting on an intestacy (see our recent blog on this topic here).

Of course, if property rights between the spouses have not been settled following separation, the surviving spouse may still be at liberty to elect in favour of equalization of net family property pursuant to the Family Law Act.

Separation Agreements and Release of Intestacy Rights

If the parties have consulted lawyers and formally settled all of the issues surrounding their marriage, they are likely to have entered into a separation agreement. Often, parties to such agreements will walk away thinking that they have fully separated out their lives and settled all issues arising as a result of marriage, cohabitation, or the breakdown of the relationship. However, solicitors drafting such agreements should be careful to properly release each spouse’s interest in the estate of the other, in case of an intestacy. In particular, while no one likes to think of it, cases have occurred where a spouse dies only days after entering into a separation agreement and before they have had the opportunity to draft a Will.

In order to properly release a spouse’s intestate interests in the other spouse’s estate, there must be a specific release of such rights using clear, direct and cogent words (see the leading case in Ontario of Re Winter, [1955] DLR 134 (Ont H Ct)). In Re Winter, the wife released the husband as follows:

The wife of the second part covenants and agrees and does hereby release the husband of the first part from all claims present, past or future against the husband for maintenance, alimony or separation allowance and acknowledges that she has no further claims against the husband nor against the estate of the husband of the first part.

The Court found that although there was a release against the husband’s estate, the release only dealt with claims for “maintenance, alimony or separation allowance” and was not sufficiently clear and cogent for the wife to have released her intestacy rights against the husband’s estate. As a result, the wife inherited on the husband’s intestacy (a result likely to have displeased the other intestate heirs and the husband, had he been alive).

Change Your Beneficiary Designations

Finally, in addition to thinking of the potential intestacy rights of a surviving spouse, don’t forget assets passing outside of the estate. Make sure to have all beneficiary designations on insurance policies, registered accounts (RRSPs and TFSAs), and pensions updated following separation.

Thanks for reading!

Sayuri Kagami

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