Dependants and Their Entitlement to a Deceased’s Estate – A summary of Earl v. McAllister, 2021 ONSC 4050
In the recent decision of Earl v. McAllister, 2021 ONSC 4050, the Divisional Court ordered 100% of the net estate of the Deceased to be used for the benefit of the minor dependants, to the exclusion of the Deceased’s wife.
Leo McAllister (the “Deceased”) died on May 3, 2017. He is survived by his wife (Barbara McAllister) and his two minor sons (the “Sons”) from a previous relationship with Tammy Earl. When the Deceased learned he was dying, he started to put his affairs in order, including executing a Will and leaving his estate (the “Estate”) to his wife and signing consents required to transfer the designed beneficiaries on one of his pensions from Ms. McAllister to his Sons.
Ms. Earl brought an application on behalf of her Sons, for their support, pursuant to Part V of the Succession Law Reform Act. The Applicant argued that for the purposes of this application, the value of two pensions and a life insurance policy should be included in the value of the Estate of the Deceased, failing which, the Estate would have a shortfall of $12,926.82 due to the Estate’s liabilities. She also argued that the entirety of the Estate should be used for the benefit of her Sons, as they are both dependants of the Deceased.
The Application Judge agreed that one of the pensions and the life insurance proceeds should be included in the value of the Estate, valuing it at $167,062.52. The Application Judge ordered the net value of the Estate to be split in two halves, one to be used for the benefit of the Sons and one to be distributed to Ms. McAllister. The Application Judge also ordered $30,000 of the Sons’ half to be paid into Court, to be paid to the Sons when they turn 18.
Ms. Earl appealed this decision, arguing that both pensions should be included in the value of the Estate, the entirety of the Estate should be used for the benefit of her Sons and that the $30,000 which the Application Judge ordered to be paid into court should now be paid out to the Appellant, for the benefit of the Sons.
For the purposes of this article, we will focus on the Divisional Court’s decision in respect of the whether to include both pensions in the value of the Estate and the manner in which the Estate is to be distributed.
The Deceased had two pension plans. The first was from the Union’s Province of Ontario Pension Plan, the value of which was included in the Estate by the Application Judge. The second was the Union’s “Canada” Pension Plan (administered in the US), which provided for a pre-retirement surviving spouse benefit under which the Respondent, as a surviving spouse, was entitled to a lump sum payment of $88,117.40.
The Divisional Court found that it was not open to the Deceased to designate someone other than his spouse to receive the pre-retirement benefit under the second pension and while the Respondent could have waived her entitlement to the receipt of that benefit, she could not be deprived of that benefit without her agreement.
As a result, the second pension was not included in the value of the Estate.
Distribution of the Net Value of The Estate
The Divisional Court found that in determining the issues between the parties, the needs of the Sons in the balancing exercise should be paramount. The court weighed the financial circumstances of the Sons against the financial circumstances of the Respondent.
Particularly, the court noted that the Sons live in precarious financial circumstances and there is very little income to support them apart from public finances and loans. The Sons live in the home of their mother’s parents. The appellant’s affidavit contained information concerning monthly expenses and the loss of the Deceased’s group health benefits. The Applicant’s evidence was that her yearly expenses exceed her income. Further, the Deceased was active in his Sons’ lives and paid the Appellant $300 per week to support his Sons until his death.
In contrast, the Respondent was not financially dependant on the Deceased, had good income of approximately $100,000 annually, had no extraordinary expenses, owned a home (although with a mortgage) and had made some provisions for her own pension. The Respondent and the Deceased had been married for just over two years at the time of death. The Respondent was also to continue to receive the benefits from the second pension.
The Divisional Court cited Madore-Ogilvie v Ogilvie Estate (2008), 88 O.R. (3d) 481 (C.A.), noting the following:
“Where there are insufficient assets to adequately provide for any or all of a deceased’s dependants, the circumstances of the case may warrant the exercise of an application judge’s discretion to use the limited assets for the benefit only of the minor dependants, to the exclusion of his wife.”
The Divisional Court concluded that in the present case, the circumstances warranted the use of the limited assets for the benefit of the Sons only, to the exclusion of the Respondent.
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For many Canadians, one or more life insurance policies represent an important component of an estate plan. If a policy cannot be honoured as a result of the cause of the insured’s death, this may completely frustrate his or her testamentary wishes.
The terms of life insurance policies typically address the issue of whether a beneficiary will be entitled to the insurance proceeds in the event that an individual commits suicide. Policy terms typically include a restriction as to the payout of the policy if the insured dies by his or her own hands within a certain of number of years from the date on which the policy is taken out (most often two years).
With the decriminalization of physician-assisted death, there was initially some concern regarding whether medical assistance in dying would be distinguished from suicide for the purposes of life insurance. The preamble to the related federal legislation, however, distinguishes between the act of suicide and obtaining medical assistance in dying.
As mentioned by Suzana Popovic-Montag in a recent blog entry, the Canadian Life and Health Insurance Association suggested in 2016 that, if a Canadian follows the legislated process for obtaining medial assistance in dying, life insurance providers will pay out on policies that are less than two years old. Since then, the Medical Assistance in Dying Statute Law Amendment Act, 2017 has come into force to provide protection and clarity for Ontario patients and their families. This legislation has resulted in amendments to various provincial legislation, including the Excellent Care for All Act, 2010, a new section of which now reads as follows:
…the fact that a person received medical assistance in dying may not be invoked as a reason to deny a right or refuse a benefit or any other sum which would otherwise be provided under a contract or statute…unless an express contrary intention appears in the statute.
The amendments provided for within the legislation introduced by the Ontario government represent an important step in the recognition of physician-assisted death as a right that is distinguishable from the act of suicide. They also confirm the right of individuals who access medical assistance in dying to benefit their survivors with life insurance policies or other benefits.
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