In the past three decades, the proportion of divorced Canadian adults has more than doubled. One consequence of the increasing divorce rate is that more individuals are entering into a subsequent marriage, after beginning a family with a previous spouse.
For estate planning, second marriages represent a challenge. The estate plan for a testator who has been married only once, with all children born within that one marriage, is relatively simple. When the testator has remarried, following a spouse's death or a divorce, and has children from an earlier relationship, the estate planner has the task of balancing the demands of a new spouse with the protection and advancement of children from the prior marriage.
The assets of an estate can be divided for the benefit of these two groups, but the estate plan should satisfy any obligations that the testator may have with respect to his or her dependents. If the testator does not leave adequate support for a surviving spouse, the survivor may be able to bring a dependent support claim against the estate. As a result, assets intended to be transferred to named beneficiaries, whether passing through or outside of the estate, can be brought back into the estate to satisfy the dependent's claim.
One popular option for planning for the provision of support to a surviving spouse is the establishment of a spousal trust. A spousal trust allows a surviving spouse to benefit from assets during his or her lifetime, before the remainder is transferred to other beneficiaries, those often being the testator's children from a previous relationship, after the survivor's death. A spousal trust can effectively support a surviving spouse, while also ensuring that the ultimate beneficiary of remaining estate assets is the person or group of people intended by the testator, rather than the beneficiaries of the surviving spouse's estate.
Life insurance is another mechanism capable of benefitting one of two distinct groups after death. The testator may designate one individual or group as the beneficiary of a life insurance policy, and leave other assets to the other person or group, pursuant to a will.
With remarriage, family dynamics remain the most important factor in formulating an effective estate plan. It is important to delve into the dynamics within the family unit and predict not only how the dynamics currently operate, but also how they may change after the testator's death. Drafting solicitors should remind clients that the implementation of family plans tends to become more contentious than is anticipated. It should be considered what will happen in the event of the testator's death and what will happen to the assets of his or her estate.
The challenge of estate planning in the context of remarriage underscores the importance of advanced estate planning. Marriage generally effects the revocation of any will that is executed prior to the date of marriage. If a testator plans to leave assets to both a current spouse and children and/or other relatives from an earlier relationship, the estate plan should be updated. Whenever there is a major change in the family, such as a birth, death, or marriage, the estate plan should be reviewed and, if necessary, amended.
Practice experience can inform what is most likely to happen when the testator dies. An experienced estate planner can properly consider the dynamics involved, review with the testator what is likely to happen, and discuss with the client how the risk of a contentious estate administration can be minimized. Ultimately, it is the client who will decide what they would like to do to address the issue of competing interests of a second spouse and the children of a previous relationship.
Attentive estate planning may not always solve the problems that can arise when a testator dies leaving behind a surviving spouse and children from a prior relationship. However, such problems can be anticipated and planned for, with a view to avoiding disputes wherever possible.
*Ian Hull and Suzana Popovic-Montag are partners at Hull & Hull LLP, an innovative law firm that practices exclusively in estate, trust and capacity litigation. To watch more Hull & Hull TV episodes, please visit our Hull & Hull TV page.