Advise clients about potential forced heirship

One of the fundamental goals clients have when they put wills in place is deciding the “who, what, when, where, why and how” of how to pass their property upon death.

The notion that we have complete liberty to give our property as we wish on death is known as “testamentary freedom,” and it’s unique to jurisdictions founded on the English common law system, including Canada’s provinces and territories, excluding Quebec.

Most civil law jurisdictions in Europe and other countries throughout the world, however, embrace a far different ethic — one based on mandatory rules that fix a certain percentage of one’s estate on death to various family members. In Canada, this type of regime is commonly referred to as “forced heirship.”

Read: When clients inherit overseas property

While Canadian succession laws do not follow the civil law extreme of forced heirship, clients must recognize that there are potential limits on their testamentary freedom. And we as advisors should review these limits with our clients during the estate planning process.

Some ways a client’s testamentary freedom may be curtailed include:

Family Law Legislation

The law may permit a surviving spouse to make a claim against a deceased spouse’s estate to receive what he would’ve received if they’d had a marital breakdown. This is in place of taking the benefits provided under the deceased spouse’s will. In certain Canadian jurisdictions, this claim has been extended to non-married cohabiting spouses.

Read: Spousal loan pitfalls

Dependant’s Relief Legislation

All Canadian common law jurisdictions permit some form of claim where a person qualifies as a dependant of the deceased and has not been adequately provided for in the deceased’s will. As Canadian courts have demonstrated, especially in B.C., this claim for support is based not just on financial need, but also on “moral obligation.” For example, in the recent Ontario decision Morassut v. Jaczynski, a sizeable award was made to the deceased’s surviving common law spouse on the basis that he had been inadequately provided for under the deceased’s estate. The judge concluded that based on the large size of the estate, the length of the couple’s relationship, the lack of other dependants, the case law regarding moral obligations, as well as the couple’s emotional and financial interdependence, the deceased did not adequately provide “proper support” to her surviving spouse in her will.

Read: Managing a dependant’s relief claim

Contractual Obligations

If a client has entered into a domestic agreement (such as a cohabitation agreement or marriage contract), his or her ability to freely dispose of his or her property may also be constrained. Separation agreements can similarly restrict a client’s testamentary freedom.

Recently, courts have also been providing support to the “mutual wills” doctrine, whereby spouses have drafted and executed their wills based on a common understanding and agreement as to how each spouse’s estate will be distributed on death. If this doctrine applies, a surviving spouse may be bound by an obligation not to alter the distribution scheme in his or her will.

Equitable Claims and Remedies

In addition to statutory claims, there may be equitable claims based on legal principles meant to ensure fairness, such as under the legal doctrine of unjust enrichment. This may result in common law remedies for a disappointed beneficiary, such as a monetary claim (quantum meruit), or a “constructive trust’ that’s imposed over property in his or her favour.

Foreign Assets

If your client holds assets in a foreign jurisdiction with a forced heirship regime, the distribution and beneficiaries of such assets may be restricted by that jurisdiction’s mandatory succession rules. Proper professional advice should be obtained to understand how local rules may apply, including planning options.

Read: If clients move, revisit their estate plans

In Canada, while people still have a fair bit of autonomy in determining the beneficiaries of their estates, we may be witnessing a move towards the more familial model embraced by civil law jurisdictions for succession of property.

Based on modern Canadian legislative developments and case law, it’s important for clients to recognize the potential limits on their testamentary freedoms during the estate planning process.