Tag: Creditor’s Relief Act
We have previously blogged at length about the broad discretionary powers of the court to award support for dependants after death under Part V of the Succession Law Reform Act. Although support applications are most often commenced in circumstances where the insufficient support was caused directly by the estate planning of the deceased individual (or lack thereof), a support application can also be a useful tool where, as a result of the deceased’s debts and liabilities at the time of death, the deceased’s estate is insolvent such that the bequests in the Will may not be carried out.
Section 2(3) of Ontario’s Creditors’ Relief Act provides:
“A support or maintenance order has the following priority over other judgment debts, other than debts owing to the Crown in right of Canada, regardless of when an enforcement process is issued or served:
- If the maintenance or support order requires periodic payments, the order has priority to the extent of all arrears owing under the order at the time of seizure or attachment.
- If the support or maintenance order requires the payment of a lump sum, the order has priority to the extent of any portion of the lump sum that has not been paid.”
Simply put, the payment of a support order, including those under Part V of the Succession Law Reform Act, is paid in priority to all other judgment debts other than those owed to the “Crown in right of Canada” (i.e. taxes).
Generally speaking a deceased’s debts and liabilities are paid in priority to all distributions to beneficiaries, such that where these liabilities are significant there could be little to no funds remaining to pay the beneficiaries after the debts are paid. As a result of the priority of support orders over other judgment debts, it could be advantageous for a surviving spouse or next of kin when faced with an insolvent estate to commence an Application for support as a dependant. If the individual is confirmed as a dependant the payment of their support Order would take priority over any other judgment debts, potentially resulting in a situation where the dependant receives a benefit from the estate where such a benefit otherwise would not materialize had they waited for their bequest under the Will or intestacy.
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Two weeks ago, I blogged about the priority of assets out of which an Order for dependant’s support might be paid. Today, I’ll look at the priority of claims for dependant’s support in relation to other claims against an estate.
Priority of Net Family Property Equalization Claims
Section 6(12) of the Family Law Act, RSO 1990, c F3, as amended, provides a statutory priority when it comes to a spouse’s entitlement to an equalization payment out of a deceased spouse’s estate. Such a payment has priority over gifts made in the deceased spouse’s will or the rights of a person to inherit on the intestacy of the deceased. Interestingly, such payments also have priority over any order for dependant’s support, except an order in favour of a child of the deceased spouse. Thus whether a dependant support claim will prevail over a claim to equalization of net family property will depend on whether or not the dependant is a child of the deceased.
Priority of Support Claims over Other Claims
In Grieco v Grieco Estate, 2013 ONSC 2465 (Grieco), the Court considered whether claims for dependant support might have priority over other claims against an estate. In that case, multiple family members, including the Deceased’s estranged wife, his common-law spouse, and his adult children claimed to be dependants of the Deceased. There were also various persons or entities with other claims and actions against the Estate (referred to as the “aviation claimants”).
The Court looked to section 4(1) of the Creditor’s Relief Act, 2010, SO 2010, c 16, Sched 4, and found that, where the estate is not bankrupt, the Creditor’s Relief Act applies such that Orders for support, including dependant’s support, prevail over other judgment debts. Where the estate is bankrupt, the claims of unsecured creditors rank equally such that the claims for an equalization payment would rank equally with other claims against the estate (see Thibodeau v Thibodeau, 2011 ONCA 110).
Thus where an estate is not bankrupt, the following hierarchy appears to exist among unproven claims brought against an Estate:
- Dependant support claims of children of the deceased;
- Equalization claims of the surviving spouse of the deceased;
- Dependant support claims of dependants who are not the children of the deceased; and
- other claims brought against an Estate.
The Creditor’s Relief Act, 2010 also speaks to the priority of certain other claims, such as judgment debts owing to the Crown in right of Canada.
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