The Equalization Claim
A right for the surviving spouse to make an equalization claim under the Family Law Act (“FLA”), subsection 70(1)(b), is possible only due to the death of a spouse on or after March 1, 1986. It is said in subsection 5(2) of the FLA that when a spouse dies, if the NFP of the deceased spouse exceeds the NFP of the surviving spouse, the latter is entitled to one half the difference between them. The court could award an amount that is more or less than one-half that difference if in regards to six factors enumerated in subsection 5(6), it would be just and proper.
Previously, jurisprudence from Ontario’s appellate court ruled that the courts could do no more than award 100% of the difference in the parties NFPs to the spouse with the lower NFP. But, in the 2007 decision in Von Czieslik v. Ayuso, a different panel of Ontario’s appellate justices held that a court has the authority to award an amount up to 100% of the value of the NFP of the spouse who has the higher NFP to the spouse with the lower NFP.
The entitlement under subsection 5(2) is “one-way” only, instead of those under subsections 5(1) or 5(3). In other words, if the surviving spouse has the larger NFP, the deceased spouse’s estate would have no claim against the surviving spouse. In such a situation, the surviving spouse is required to repay the estate any “overpayment” he or she receives in the form of insurance proceeds or lump sum payments from a pension or similar plan. When the surviving spouse’s NFP is the lesser amount, he or she is entitled to a sum of money which will “equalize” the spouses’ respective NFPs.
Unless the will of the deceased spouse expressly states that the surviving spouse can have his or her entitlement under the will in addition to his or her entitlement under subsection 5(2), the surviving spouse is put to an election. Either the entitlement under the will or an equalization payment can be claimed by him or her, but not both (FLA, subsection 6(1)). Likewise, where there is no will, the surviving spouse is to pick either the entitlement according to Ontario’s Succession Law Reform Act (“SLRA”) or the equalization claim (FLA, s. 6(2)). Lastly, on a partial intestacy, the choice is to be made between entitlement under the will and the provincial intestacy rules on the one hand, and the equalization claim on the other hand, (FLA, s. 6(3)).
How, When and Where the Election is Filed
The election is to be filed within six months of the death of the deceased spouse, (FLA, s. 6(10)) so long as no application is granted for an order to extend the time to file, (FLA, s. 2(8)). The election is to be in the prescribed form and is to be filed at the office of the Estate Registrar for Ontario in Toronto, (FLA, s. 6(10)). This office could be found out from the Superior Court of Justice based on the geographical area in which the deceased spouse was staying at the time of death. If the surviving spouse fails to do this, he or she is deemed to have elected to take under the will (if testate), under the SLRA (if intestate) or both as the case may be, unless the court, on application, orders otherwise, (FLA, s. 6(11)).
Who Can Make the Election?
Besides the obvious surviving spouse, case law holds that a validly executed and subsisting continuing power of attorney entitles the named attorney to file the election on behalf of the surviving spouse as grantor of the power. The Public Guardian and Trustee acting as statutory guardian of property of a surviving spouse pursuant to a certificate issued under section 63 of the Mental Health Act would have the necessary authority to make the election, as would a mentally incompetent surviving spouse’s guardian of property appointed under subsection 15(k) of the old Mental Incompetency Act. Two new types of surrogates are created by the Substitute Decisions Act, 1992: a “statutory guardian of property” and a “court-appointed guardian of property”. In principle, it seems that either of these surrogates would have the authority to elect on behalf of a surviving spouse, subject to any restrictions imposed either by the surviving spouse in the relevant empowering document or by court order.
The question is now about the personal representative(s) of the surviving spouse who dies within the six-month limitation period without having election. Does the personal representative(s) file an election and make application for an equalization payment? This is not answered clearly and it is an open question as to whether a trustee-in-bankruptcy has the power to elect on behalf of a bankrupt surviving spouse. It is likely that in time to come this issue would be litigated.
Can the Election be Revoked?
It seems that under the FLA, an election, once filed with the office of the Estate Registrar for Ontario, is not revocable. However, there are several conflicting decisions on the point. One recent example is Iasenza v. Iasenza Estate, which held that the court has a residual discretion to authorize revocation of an election in restrictive circumstances where the interests of justice so require and where it is warranted by a balancing of interests of the affected parties. Nonetheless, until the issue is clarified by an appellate court, prudence would dictate, if one is acting for a surviving spouse, that the election, once filed, be treated as irrevocable. Having regard to that, a surviving spouse should make every effort to determine his or her entitlement under the FLA, prior to making a decision as to which way to elect. Anyway, where the surviving spouse would receive the whole of the deceased spouse’s estate, whether according to the will or the intestacy rules, there is no point in electing an equalization claim. It is essential for the surviving spouse to establish his or her entitlement to insurance proceeds and to survivorship benefits under pension and similar plans arising on the death of the deceased spouse. Election in favour of equalization claim could lose such benefits, along with entitlement under the will or on intestacy.
For all your Family Law matters and how best to resolve your estate and succession issues or that with a spouse contact the lawyers at Levy Zavet PC (Levy Zavet).