Keeping the Family Together: How to Avoid Future Claims against Estates

Dealing with an estate claim can come at a great cost. It can significantly reduce the assets available for distribution, disrupt the Will’s distribution of property and, worst of all, break family bonds – sometimes forever. Developing an estate plan that takes the potential claims of family members into consideration, and acknowledges the legal rights of dependants or other family members will help eliminate the threat of future litigation. This could save time, money and reduce the risk of damaging family ties. It can be difficult to unravel the overlapping rights of different family members. Here are some crucial things you should know about the rights of spouses and dependants, as they pertain to competing property claims and dependant’s relief.

Spousal rights to property and support

Married persons, and to some extent common-law and same-sex partners, have financial rights arising from their relationships. Some of these rights are recognized upon the death of their partner. The regulations around such rights vary in each province, so you may need to revise your Will if you move to another region. In addition to rights to support, division of property, and rights to the matrimonial home during lifetime, a surviving spouse could have a claim against the estate of the deceased spouse or partner. Again, the details vary by province or territory, but generally include rights to make a claim with respect to division of property, or financial support where a spouse has not been adequately provided for. To minimize the impact of such a claim, the individual may want to enter into a marriage contract which is sometimes called a “domestic contract” or a “pre-nuptial arrangement”. The use of an inter-vivos trust may also be effective to shelter assets from a claim, since the assets in the trust will not generally form part of the estate. Beneficiary designations for insurance and registered plans and the use of jointly held property with rights of survivorship may also keep assets outside the estate of the deceased spouse, and provide some insulation from such a claim.

Claims under dependant’s relief legislation

A child or spouse of the deceased, and certain other family members to whom the deceased may have had a support obligation, may be entitled to make a claim against the estate under the dependant’s relief legislation for support or maintenance.Relief is available if the person qualifies as a dependant under the relevant provincial or territorial legislation, and if the deceased individual dies without making the adequate provision for such person. Each province and territory in Canada has enacted some form of dependant’s relief legislation. There is a three-step process for determining an award under a dependant’s relief claim: 1. Does the person making the claim qualify as a dependant? 2. Were adequate provisions made in the Will of the deceased, or as a result of an intestate distribution? 3. What form of relief, and which amount, is appropriate? Family protection claims can be very costly and usually the costs are borne by the estate. If you decide to exclude children or other family members who would otherwise be entitled to or expect to benefit from your estate, you should clearly state the reason why in your Will. This could significantly impact the Court’s decision on how to best settle a claim. It could also help minimize the associated legal costs. If you do wish to exclude one or more family members from your Will, consult your lawyer first so that you fully understand the implications of your decision. The emotional toll on family members and the added burden falling upon the executors and administrators (if there is no Will) may leave a family torn apart. Let your legacy be worth remembering for the right reasons.

Emerita Mercado, CFP, TEP specializes in trust and estate planning issues. She helps clients protect their assets by setting up family holding companies, private foundations and family trusts as a means of intergenerational wealth transfers. Emerita also collaborates with families and executives to create dynamic total wealth management solutions.

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These articles are for general informational purposes only. Please obtain professional advice before taking any action based on this information. No endorsement or approval of any third parties or their advice, information, products or services should be implied by any references to third parties contained in any article. Trademarks cited in these articles are the respective properties of their owners.

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