By Jim Jeffcott
Elections are not just about choosing political representatives. Elections also refer to choices one might make in other circumstances in our lives. For example, on the death of a spouse.
A surviving spouse is given a choice, which many of the people that I have dealt with in my practice were unaware of. The choice is about how to deal with the property of the deceased spouse. The surviving spouse has six months to decide if they wish to elect to receive his or her entitlement under section 5 of the Family Law Act (Ontario). If the surviving spouse does not make that election within the six months after the date of death (unless the time is extended), the surviving spouse is deemed to have elected to take what the spouse is entitled to under the deceased spouse’s Will or intestacy (in which case property is divided in accordance with the provisions of the Succession Law Reform Act (Ontario)).
Section 5 of the Family Law Act sets out how property is divided between married spouses in the event of termination of the relationship and that extends to include the death of a spouse.
In my experience, few people are aware of the existence of the election. Even those who are aware of the election have little understanding of the details and the application of the election. It is important to consider the issue of death of a spouse when contemplating marriage or when considering a Cohabitation Agreement or Marriage Contract, when contemplating an Estate plan, including preparing your Will and Powers of Attorney and when a spouse dies.
Part I of the Family Law Act addresses family property. The provisions are restricted to addressing the family property of married spouses only. The definition of spouse specifically refers to parties who are married or who went through a marriage ceremony but the marriage is void or voidable. It does not refer to unmarried spouses. As a result the comments in this article do not apply to them.
If one chooses to elect to receive one’s entitlement under section 5 of the Act, subsection 5(2) applies and a surviving spouse is entitled to one-half of the difference between the parties’ net family properties if the value of that deceased person’s property exceeded the value of the property of the surviving spouse on the day prior to the death of the deceased party. That being the case, a surviving spouse would only possibly elect to receive the entitlement under the Family Law Act if the value of the deceased spouse’s property exceeded his or her value.
If the election is not made, the surviving spouse is entitled to receive whatever bequests are provided for him or her under the Will of the deceased spouse if there is a Will. If there is no Will, or if the Will does not dispose of all of the property of the deceased spouse, the surviving spouse is entitled to receive what the law provides to him or her pursuant to the Succession Law Reform Act.
Gifts and benefits which are provided to a surviving spouse on the death of their spouse outside of a Will are credited against the surviving spouse’s entitlement under paragraph 5. For instance, the value of any life insurance, pension benefits or property held with the deceased spouse in joint tenancy (which will pass to the survivor by right of survivorship) will be deducted from the equalization payment to which the surviving spouse is entitled. And if the amount of the credits exceeds the equalization payment owed to the surviving spouse, the excess must be paid to the Estate of the deceased spouse.
The Family Law Act does permit a spouse to provide that a surviving spouse may receive the gifts to him or her in the Will in addition to the entitlement under section 5. Otherwise, the effect of the election is that the gifts to the surviving spouse in any Will are revoked and the Will is to be interpreted as if the surviving spouse had predeceased the deceased spouse.
The legislation specifically permits parties to contract to deal with their net family property on the death of one them in a way which is different from what the law provides. This kind of contract would be a Marriage Contract (or a Cohabitation Agreement as such an agreement will survive the parties’ marriage unless it provides otherwise.)
The members of the Family Law Group and the Estates and Succession Law Group at LMR would be pleased to answer any questions you might have and are able to provide assistance to you with respect to these important issues.