How to address an inadequate inheritance

If your client’s wife only left him a quarter of her estate, and little or no life insurance or other benefits on her death, he may be entitled to more.

The Family Law Act (Ontario) allows married (not common-law), surviving spouses to make equalization claims when their partners die.

The resulting payment is meant to compensate the surviving spouse for approximately half the increase in the value of any property acquired during the marriage.

For your client, the claim calculation works as follows:

• First, he must obtain a valuation of his wife’s assets, and his own, as of one day before she died (assuming there was no prior marriage breakdown between them).
• Second, to determine each spouse’s net family property value, subtract the value of his or her property on the marriage date (net of liabilities and excluding the matrimonial home if the same one is still owned) from the value of his or her property on the valuation date (net of liabilities).

If his net family property is less than his wife’s, he may claim half the difference between their net family properties.

What’s a matrimonial home?

This home includes any family residence which the spouses or a spouse and children ordinarily occupy (or occupied at the relevant time). One or both spouses must have a property interest (e.g., by owning it) in the residence for it to qualify as a matrimonial home.

Recent changes in Alberta

Marriage no longer revokes an existing will. And, if there’s a divorce, a former spouse is now deemed to have predeceased the testator for purposes of any gifts and appointments, unless otherwise stated in the will.

Exclusions to consider

The law excludes certain assets from net family property, including gifts and inheritances from someone other than a spouse after the marriage date, and income from those gifts and inheritances if the person making the gift or will so stated.

Spouses also may decide to exclude additional property using domestic contracts.

The act doesn’t deduct the value of the matrimonial home from net family property at the date of marriage. Instead, it’s included on the valuation date if it’s still the same matrimonial home.

If the home was registered in the wife’s name, and your client was living there when his wife died, he has the right to continue living there rent-free for 60 days.

After that, the estate can charge him occupation rent at fair market value.

Issues to note

• The equalization claim on death is available only to the surviving spouse, so the wife’s estate can’t make a claim if her net family property value was less than your client’s.

Warning!

If your client’s will hasn’t been updated since march 1, 1986, it won’t account for the Family Law Act of Ontario.

• If your client makes an equalization claim, he loses all entitlements under his wife’s will (or intestacy, if she didn’t make a valid will).
• Certain benefits arising on his wife’s death are generally credited against the claim, such as insurance and lump-sum RRSP payments.
• He must make the equalization claim within six months of his wife’s death, unless the court extends that period.
• Making this claim requires detailed valuations of your client’s property, which may become public through the court process—not the best route if privacy is a concern.