With nearly half of all marriages ending in divorce, second marriages and blended families continue to become increasingly common. As a result, estate lawyers are more frequently encountering complex family dynamics and legal issues that involve family law.
The overlap between family law and estate issues creates challenges for estate planners, who should be made aware of potential issues so that they can be addressed head on. Often, one of the most difficult aspects can be that, in forming an estate plan for members of a blended family, there are greater numbers of individuals who may have competing interests in a single estate. If a testator does not make adequate provision for everyone who expects to benefit on his or her death, disappointed beneficiaries may be left behind.
One common class of assets that implicates both family and estate law is pension benefits. Pension benefits have the potential to form a significant part of an estate or testator’s lifetime assets. As a result, they can be the source of conflict if not properly considered when formulating an estate plan. The designated beneficiaries of pension benefits should be updated as circumstances change to avoid unwelcome results after death, including conflict that may lead to litigation between one's survivors.
In the Ontario Court of Appeal decision of Carrigan v. Carrigan Estate, there was debate over the proper recipient of pension benefits after the death of the plan member. The common law spouse, who resided with the deceased at the time of his death, asserted that she was entitled to the pension benefits, as did the deceased's separated spouse, who had been previously designated as the beneficiary of the plan and from whom he was not formally divorced at the time of his death. In this case, the Court ultimately found that, although the separated spouse was not living with the pension member at the time of his death, she was legally entitled to the benefits as the plan member's surviving married spouse and designated beneficiary under the plan.
Carrigan Estate created considerable uncertainty due to its strict interpretation of the Pension Benefits Act. As a result, on July 24, 2014, Bill 14, Building Opportunity and Securing Our Future Act (Budget Measures), 2014, was released, outlining proposed amendments to the Pension Benefits Act and how its provisions should be interpreted in light of circumstances like those seen in Carrigan Estate. On October 21, 2015, the Lieutenant Governor issued a proclamation in respect of the Act and certain of its provisions (including those that amend the Pension Benefits Act) recently came into force on November 1, 2015. This new legislation provides that a common law spouse who is living with a pension plan member is entitled to pension benefits, in priority to a married spouse from whom the member was living apart at the date of death. While this legislative change has limited the relevance of Carrigan Estate in this regard, the decision still serves as a reminder of the potential consequences of failing to review and update an estate plan following a change in family circumstances.
Another area where family law issues impact estate planning is in the case of alleged beneficial interests in real property. A constructive trust is an equitable remedy that may be imposed to convey a benefit to a party who has suffered some sort of deprivation and does not hold a legal interest in the subject property. Such a trust can be applied in circumstances where a link exists between the property and loss, when awards of damages are considered to be insufficient. Constructive trusts have been used to remedy issues arising within family law disputes. In particular, the remedial constructive trust has been used to provide for a fair division of property between common law spouses, where one spouse has been unjustly enriched by the work contributed to the family at the expense of the other. The Supreme Court of Canada held in Kerr v. Baranow that, if a spouse can demonstrate the existence of what it refers to as a "joint family venture", courts may award property through constructive trust to reflect that spouse's contributions to the family.
In estate law, the constructive trust can also be used as a remedy in situations of unjust enrichment. These types of claims can include disappointed beneficiaries who provided assistance to a testator under the promise that they would be left part of his or her estate and also as an alternative to, or in conjunction with, dependant support claims. In many cases, however, such claims may most effectively be addressed while the testator is still living through amendments to his or her estate plan, in recognition of the interests that others may have in the assets of his or her estate to avoid future litigation.
Changes in family circumstances can have a profound impact on an estate plan. In Canada (with the exception of Quebec), for example, marriage automatically revokes any prior wills unless a will was made specifically in contemplation of that marriage. To recognize family changes involving marriage, separations, and the beginning or end of common law relationships, it is important to periodically review one's estate plan to determine if changes also need to be made to a Last Will and Testament, beneficiary designations, or other testamentary documents, especially after any major life event. Obtaining legal assistance in considering, from time to time, whether an estate plan should be updated can be invaluable in avoiding future conflict.
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.