March 15, 2016 By:
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One of the biggest misunderstandings I hear in my practice is the perceived estate rights of common-law spouses and minor children. The Income Tax Act of Canada treats couples as spouses if they have cohabited for a certain period of time or have a child between them. Various employee benefit plans and registered products have similar concepts. In addition, it is assumed estate assets which are set aside for a child can still be accessed for that child's benefit.

A Will fulfills several purposes. It sets out the beneficiaries of an estate and also names someone, or a series of people, who the deceased wishes to administer his or her estate. For estate purposes, Ontario does not treat common-law spouses very well. When a person dies without a Will (known as "intestate"), the Ontario statutes allow any person who is related to the deceased, or has an interest in his or her estate, to apply to the Ontario Superior Court to be appointed estate trustee or administrator of the deceased's estate. There is no statutory list of who has a priority on being appointed as estate trustee. It is not uncommon for a deceased's common-law spouse and the deceased's parents or siblings to make competing applications to become the estate trustee of the deceased's estate.

Once the order for appointment is obtained, and following payment of the deceased's debts, the balance of the deceased's intestate estate is distributed in accordance with the Succession Law Reform Act of Ontario (the Act).

A "spouse" is defined in the Act as a person married to the deceased. Common-law spouses are not entitled to any part of the deceased's estate in an intestacy, except through a dependant relief claim.

Children of a deceased do a little better in an intestacy, provided they are the biological children of the deceased. The Act states natural children of a deceased will receive the deceased's estate in an intestacy equally (after payment of debts). Moreover, if a deceased's child dies before the deceased parent, the children of the deceased child will inherit the deceased child's share.

In an intestacy, a minor beneficiary will receive his or her share at 18 years of age. Prior to that time, the minor child's share is paid into Court and administered by a branch of the Ontario Government, called the Children's Lawyer. With the approval of the Children's Lawyer, arrangements can be made for periodic payments from the Court for the benefit of the minor child before he or she reaches 18 years of age. When the child reaches 18 years, the balance of his or her share is paid to the now adult child.

The Act does, however, allow persons who are defined in the Act as a "dependant" to apply to the Ontario Superior Court for a support payment from the deceased's assets. Normally, this is a lump sum. Interestingly, a dependant is defined as a married spouse, a parent, a natural child, a brother or sister of the deceased, or a person to whom the deceased was providing support, or was under a legal obligation to provide support, immediately before the deceased's death.

In this part of the Act, the definition of a "child" is expanded sufficiently to normally include both the deceased's own children, as well as a child who is part of the deceased's blended family, whether or not formally adopted.

Before a common-law spouse is able to obtain any support from a deceased's estate, he or she must be able to prove the family was being supported at the time of the deceased's death. Quite often, evidence that the surviving common-law spouse relied on the deceased's income to support the family unit is necessary for any support order to be obtained. Normally, any support awarded to a common-law spouse is not large.

Making a Will is not difficult and should be done regardless of whether a person has children or a spouse. Whether or not a Will has been made, a deceased can still ensure some or the bulk of his or her assets go to the people he or she may wish to benefit. Assets put in joint names with a common-law spouse, with the intention of benefiting the spouse, will pass to that joint owner on the deceased's death.

Sometimes, a common-law spouse or child is named as a beneficiary of a deceased's pension plan, registered plans, or life insurance policies, or as a successor owner of a Tax-Free Savings Account. In these cases, the proceeds or plans will pass to the named beneficiary. One should receive advice from the carrier before naming a minor child as a beneficiary of an insurance policy or Registered Retirement Savings Plan (RRSP).Without a Will, the proceeds of an insurance policy with a minor child as beneficiary will be paid into Court and released to the minor child on his or her 18thbirthday. As well, income taxes will be paid by the deceased's estate if a minor child is named as a beneficiary of an RRSP. This is unless the estate trustee purchases an annuity with the registered funds for the benefit of the child, and this annuity is paid in full for the benefit of the child by the time he or she reaches 18 years of age.

Estate litigation is quite emotional and expensive. Preparing a Will can prevent both possible shock to a family on the deceased's death and the possible litigation expense that may follow. 

John Peart is a partner with the Ottawa law firm of Nelligan O'Brien Payne LLP and a member of the firm's Wills and Estates Group. John is Certified as a Specialist (CS) in Estates and Trusts Law by the Law Society of Upper Canada and is also a member of the International Society of Trust and Estates Practitioners.

[This article was originally published in the March/April 2016 edition of Fifty-Five Plus Magazine.]

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This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.