Tag: net family property

11 Dec

Preserving the Right to an Equalization of Net Family Properties

Nick Esterbauer Estate & Trust, Support After Death, Wills Tags: , , , , , , , , , , , , , 0 Comments

A recent decision of the Ontario Superior Court of Justice highlights the importance of preserving a surviving married spouse’s ability to elect for an equalization of net family properties within the six-month limitation period.

Upon death, a surviving married spouse in Ontario can elect for an equalization of net family properties under Sections 5 and 6 of the Family Law Act instead of taking under the predeceasing spouse’s will or, if the spouse has not left a will, on intestacy.  Subsections 6(10), 6(11), and 7(3)(c) of the Family Law Act provide that the surviving spouse must ordinarily make an election within six months of date of death and not after that date.  The Court may, however, extend the election deadline in the event that: (a) there are apparent grounds for relief; (b) relief is unavailable because of delay that has been incurred in good faith; and, (c) no person will suffer substantial prejudice by reason of the delay (subsection 2(8) of the Family Law Act).

Courts have reviewed the circumstances in which an extension is typically ordered.  The requirement that the delay be incurred in good faith has been interpreted as meaning that the party has acted honestly and with no ulterior motive (see, for example, Busch v Amos, 1994 CanLII 7454 (ONSC)).

In Mihalcin v Templeman, 2018 ONSC 5385, a surviving spouse had commenced two claims with respect to the estate of her late husband and an inter vivos gift made to a live-in caregiver.  However, neither of the proceedings had sought any relief relating to an equalization of net family properties, nor did the wife take any steps to make an election or to extend the time within which she was permitted to do so.  The Court reviewed whether the delay in making the election was in good faith.  The evidence regarding the reasons for the delay in electing for equalization were considered to be vague and insufficient to satisfy the evidentiary burden that the delay was incurred in good faith.  Accordingly, the applicant was not permitted to amend her pleadings to incorporate this relief.

Justice Bruce Fitzpatrick commented as follows with respect to the importance of limitation periods, generally (at para 48):

I am mindful of the general importance of limitation periods for the conduct of litigation. There is an obligation on parties to put forward all known legitimate claims within certain time limits. In this case, the time limit was relatively short. I think it cannot be readily ignored. The evidentiary record is not sufficient for me to say that justice requires me to exercise my discretion in favour of allowing [the applicant] to amend her claim so as to include a claim for equalization in all of the circumstances.

Where an equalization of net family properties may be sought at a later time (for example, pending the outcome of a will challenge or dependant’s support application), it is prudent to seek an extension well before the expiry of the six-month limitation period as courts may or may not assist a surviving spouse in seeking this relief down the road, if and when it may become advisable.

Thank you for reading,

Nick Esterbauer

 

Other blog entries/podcasts that may be of interest:

 

18 Jun

When is it Appropriate to Extend the Time Granted in Favour of Equalization under the Family Law Act?

Kira Domratchev Estate & Trust, Litigation Tags: , , , , , , , , , , 0 Comments

Applications for an extension of time (beyond six months from date of death) to elect under the Family Law Act (“FLA”) are regularly brought before the Court. Decisions with respect to that are often dealt with by way of short endorsements.

Justice Dunphy, in Aquilina v Aquilina, 2018 ONSC 3607, a recent court decision, made some interesting comments regarding applications for an extension of time in such circumstances.

Background

The Deceased passed away in December, 2017, leaving the Applicant (his wife) and their three adult children. The Applicant was primarily a homemaker and as such, her level of information regarding the family financial affairs was imprecise. The Estate was not a simple one to administer, in part due to a number of business interests the Deceased had in the family’s native country, Malta, held through various corporations, real estate holdings and an active business.

At the time of the hearing, the Estate did not have an administrator. It was determined that the Deceased did not leave a Will.

Statutory Regime

The Applicant in this matter had two options – making a claim under the Succession Law Reform Act (“SLRA”) or the FLA.

Under the SLRA, in the event of an intestacy, the beneficiaries of the Deceased’s estate are the Applicant and their three adult children. Under s. 46(2) of the SLRA, where there is no Will and there is more than one child of the Deceased, the surviving spouse is entitled to 1/3 of the Estate plus the “preferential share” prescribed by s. 45 of the SLRA.

In contrast, s. 5(2) of the FLA provides that the surviving spouse will receive 1/2 of the difference between the value of the net family property of each of the spouses where the Deceased had the higher of the two amounts.

The Applicant has a period of six months from the date of death to make the election as per s. 6(10) of the FLA. Absent an election, the surviving spouse takes under the SLRA.

Criteria for Extension

The Applicant requested that the court: (i) extend the time to make an election until two years from the date of the application; (ii) extend the time for the deemed election to the same date; and (iii) extend the time during which distributions from the Estate are suspended until the same date.

In making a finding, the Court must consider:

  1. Whether there are apparent grounds for relief;
  2. Whether delay, if any, was incurred in good faith; and
  3. Whether anyone will be substantially prejudiced by the delay.

It is important to note, that the surviving spouse does not have to have precise and accurate information but that he or she must have sufficient information to make an informed choice. Justice Dunphy noted that extensions are intended to be the exception and not the rule.

Analysis and Decision

Justice Dunphy held that it was going to take a period of time – very likely a year or more – to be able to gather the facts necessary to understand the value of this Estate and the Applicant’s intersecting interests within (meaning the consequences flowing from her different roles as a shareholder, widow and spouse). Therefore, Justice Dunphy held that there are some grounds for relief in the circumstances of this case.

In considering whether there was any delay that was not incurred in good faith, though Justice Dunphy noted that the Application was brought very close to the six month anniversary of the Deceased’s date of death, he placed weight on the fact that the death was “sudden, unexpected and shocking” and the relative complexity of the Estate. He held that the delay was incurred in good faith.

Justice Dunphy found that there would be no substantial prejudice in this case if an election was granted because the only other beneficiaries of the Estate are the three adult children of the Deceased and the Applicant, who confirmed that they did not oppose the motion. He did balance against that finding, however, the inherent prejudice in having all or a substantial portion of the Estate frozen. In making this consideration, Justice Dunphy found that any prejudice in this matter was slight.

Based on the facts, Justice Dunphy held that more time would be required to consider the rights of the Applicant, as the surviving spouse, under the SLRA as compared to the FLA. As such, he granted the Applicant all the relief sought, but reduced it to one year from the date of the Application instead of the two years that the Applicant was seeking.

Thanks for reading.

Kira Domratchev

Find this blog interesting? Please consider these other related posted:

Lundy v Lundy Estate: Delay in Seeking Extension to Make Family Law Act Election

Revoking a Family Law Act Election

Family Law Elections: Inclusion/Exclusion of Assets in the Net Family Property of the Deceased

19 Dec

When does a Beneficiary have a Specific Interest in Trust Assets?

Rebecca Rauws Estate & Trust Tags: , , , , , , , , , 0 Comments

A beneficiary of a trust can have either a vested or a contingent interest in the trust’s assets. For example, if a trustee holds an asset in trust for another person, with no further conditions attached, the beneficiary’s interest in that asset will be vested. However, if the trustee holds the same asset in trust for a beneficiary, subject to the condition that the beneficiary attain the age of 30, that beneficiary’s interest depends on them reaching the age of 30, and is therefore contingent. Whether a beneficiary’s interest is vested or contingent can have different consequences depending on the particular circumstances.

In Spencer v Riesberry, 2011 ONSC 3222 (affirmed in Spencer v Riesberry, 2012 ONCA 418), the Ontario Superior Court of Justice considered the nature of a beneficiary’s interest in a trust. Specifically, in the context of matrimonial litigation, the court considered whether a spouse’s beneficial interest in real property held by a trust could be considered as “property in which a person has an interest” for the purpose of s. 18(1) of the Family Law Act, R.S.O. 1990, c. F.3, such that the property in question could be considered the matrimonial home. If a property is considered to be a matrimonial home, pursuant to s. 4 of the Family Law Act, it cannot be deducted or excluded from the calculation of net family property and can contribute to increasing the owner spouse’s net family property.

In this case, a married couple, Sandra and Derek, had been residing, with their children, in their family home on Riverside Drive. In 1993, Sandra’s mother, Linda, had purchased the Riverside Drive property and settled it in a trust (the “Trust”). Sandra and Derek resided in the residence prior to their marriage in 1994, as well as during the marriage. The couple separated in 2010.

The beneficiaries of the Trust were Sandra, Linda, and Linda’s three other children. Three other properties were added, by gift, to the Trust over subsequent years, and each of these other properties were occupied by one of the other three children and their families.

The terms of the Trust provided that the trustee was to hold the trust property, subject to a life interest in favour of Linda. Upon Linda’s death, the trustee was to divide the trust property into equal parts so that there is one part for each beneficiary living at the date of Linda’s death.

The court considered the nature of Sandra’s interest in the Riverside Drive property in the context of her net family property and whether it could be characterized as a matrimonial home. Due to the terms of the Trust, the court held that Sandra did not have a specific interest in the Riverside Drive property. Although she was a beneficiary of the Trust, which owned the Riverside Drive property, it does not follow that Sandra was specifically entitled to that property in particular. Sandra’s interest in the Trust was characterized as a contingent beneficial interest, as her ultimate entitlement under the Trust depended on various factors. For instance, as the division of Trust property amongst beneficiaries would happen only upon Linda’s death, the assets to be distributed would consist of whatever is held by the Trust at that time. Additionally, the beneficiaries must be alive at the time of Linda’s death in order to receive their share.

On this basis, the Court concluded that Sandra did not have a specific interest in the Riverside Drive property such that it could be considered a matrimonial home. As Sandra was a contingent beneficiary of the Trust, the Court did find that she held an interest in the Trust’s assets generally, which was required to be valued and included as part of the equalization calculations. However, as the interest is not subject to the special treatment given to the matrimonial home, it can be deducted or excluded from net family property, as applicable. Overall, as Sandra’s interest in the Trust’s assets was contingent and not vested, it had a significant effect on the matrimonial proceedings with her spouse.

 

Thanks for reading and happy holidays!

Rebecca Rauws

 

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12 May

Hull on Estates #418 – Equalization of net family property under the Family Law Act

Hull & Hull LLP Hull on Estates, Hull on Estates, Podcasts, PODCASTS / TRANSCRIBED, Show Notes, Uncategorized Tags: , , , , , , , 0 Comments

This week on Hull on Estates, Paul Trudelle and Josh Eisen discuss some issues that can arise in equalization of net family property under the Family Law Act and why it might not be appropriate to elect in favour of equalization even when the spouse receives nothing under the will.

Should you have any questions, please email us at webmaster@hullandhull.com or leave a comment on our blog.

Click here for more information on Paul Trudelle.

Click here for more information on Josh Eisen.

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