When a surviving spouse receives significant assets outside an estate, such as RRSPs, RRIFs, life insurance proceeds, pension death benefits, or jointly held assets that pass by right of survivorship, a common question arises: can the spouse still elect for equalization under Ontario’s Family Law Act (“FLA“)?
The short answer is yes. However, the analysis does not end there.
Ontario’s legislative scheme is designed to preserve a surviving spouse’s right to seek equalization while preventing a double recovery. As a result, assets received outside the estate often play a significant role in determining the amount ultimately payable.
Equalization and Non-Estate Assets
Under section 5(2) of the Family Law Act (“FLA”), a surviving married spouse may elect to receive an equalization payment rather than take under the estate. The election must generally be made within six months of death.
Receiving assets outside the estate does not prevent a spouse from making that election. However, those assets may affect the amount ultimately recoverable.
No Double Recovery
The FLA contains provisions designed to prevent a surviving spouse from receiving a double recovery.
Sections 6(6) and 6(7) require certain benefits received on death to be credited against an equalization entitlement, including:
- life insurance proceeds;
- pension death benefits;
- jointly held assets passing by survivorship; and
- other property passing directly to the spouse outside the estate.
As a result, a spouse may still pursue an equalization claim, but the value of assets already received will generally reduce the amount payable by the estate.
The Leading Authority
In Weatherdon-Oliver v. Oliver Estate, 2010 ONSC 5031, the Ontario Superior Court confirmed that these crediting provisions are mandatory and reflect the Legislature’s intention to prevent double recovery.
Importantly, the receipt of designated assets does not eliminate a spouse’s right to elect for equalization. Rather, those assets are taken into account when calculating the amount payable by the estate.
An Important Exception
The crediting provisions may not apply where the deceased expressly provides that a benefit is to be received in addition to any equalization entitlement.
That intention may be set out in a will, beneficiary designation, or other written instrument. Clear wording is generally required.
In practical terms, however, a will drafted with that intention is likely to be the exception rather than the rule. If a testator intends a surviving spouse to receive a benefit in addition to any equalization entitlement, one would generally expect the will to provide the spouse with a sufficiently meaningful benefit that an equalization election would not be necessary in the first place.
What About Dependant Support?
The analysis differs where a surviving spouse advances a dependant support claim under Part V of the Succession Law Reform Act rather than electing under the FLA.
In that context, the automatic crediting provisions do not apply. However, assets already received by the spouse remain relevant because the court must consider the spouse’s financial circumstances, resources, and needs when determining entitlement to support.
Takeaway
A surviving spouse who receives RRSPs, RRIFs, TFSAs, pension benefits, life insurance proceeds, or other designated assets can still pursue an equalization claim. In most cases, however, those benefits will be credited against any equalization entitlement, ensuring that the spouse receives what the legislation permits without obtaining a double recovery.
Thank you for reading!
By Yalda Mostafaie