It cannot be stressed enough how important it is 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.
With this in view, the surviving spouse, who makes his or her decision on the basis of a will in respect of which no certificate of appointment of estate trustee has been issued, should also be cautioned. In the end, if the will put forward is found to be invalid; the surviving spouse would find that the election should have been made the other way. A wise course of action would be to defer the filing of the election until after the certificate of appointment of estate trustee with a will has been issued. Should there be difficulty in locating a will or there be litigation over the validity of a will, it would be appropriate to apply for an extension of time for filing the election beyond the six-month period following the deceased spouse’s death, (under subsection 2(8) of the Family Law Act (“FLA”)).
Admittedly, there are instances when a certificate of appointment of estate trustee with a will (formerly “letters probate”) is issued and a later will surfaces after the election is filed. Likewise, there are instances, where a will is found after a certificate of appointment of estate trustee without a will (formerly “letters of administration”) is issued. In that event, there will be problems in determining the rights of the surviving spouse who has already filed an election and who now changes his or her mind on the basis of the subsequently discovered will. As stated before, when a spouse files no election within the statutory six-month period, the FLA deems him or her to have elected to take under the will or on intestacy, unless the court, on application, orders otherwise (FLA, subsection 6(11)). Here, in this instance, the court has jurisdiction to reverse the (deemed) election, but it is up to future jurisprudence to establish the bounds within which that discretion will be exercised.
Effect of Election
Electing Under the Will or On Intestacy
When the surviving spouse elects, or is deemed to have elected, to take under the will or on intestacy, his or her entitlement arising on the death of the deceased spouse will be unaffected (FLA, s. 6(4)). Beside the benefits under the will or on intestacy, a surviving spouse will receive all insurance proceeds from policies on the deceased’s life, naming him or her as beneficiary as well as any death or survivorship benefits under pension or similar plans in which he or she is so named, (FLA, s. 6(4)). In addition, the right of survivorship associated with any property jointly owned by the spouses will be operative in the normal manner (FLA, s. 6(4)).
Electing to Make an Equalization Claim
When the surviving spouse elects to take under the FLA, things take a dramatic turn. Unless the deceased spouse has otherwise expressly indicated in his or her will that the benefits under the will are in addition to those available under subsection 5(2) of the FLA, an election under the FLA will result in the following consequences:
1) The forfeiture of all entitlement under the will by the surviving spouse; and
2) The will is interpreted as if the surviving spouse had predeceased the testator, (FLA, subsection 6(8)).
Effect on Executors
In the event that the deceased spouse’s will appoints the surviving spouse as executor, either alone or together with another or others, the surviving spouse’s election in favour of an equalization claim results in the will being interpreted as if he or she had predeceased the testator. Section 6(8) of the FLA states that the surviving spouse could not take the appointment since he or she would be considered to have predeceased the testator for all purposes of the will. A counter argument is made by comparing the wording of this provision with that of subsection 17(2) of the Succession Law Reform Act (“SLRA”). The latter provision gives the impact of the dissolution of the testator’s marriage after the date of the will. Following s. 6(8) of the FLA, s. 17(2) of the SLRA also states that, absent a contrary intention stated in the will, the will is to be regarded as if the former spouse had predeceased the testator. But, it then goes on to state expressly that the surviving spouse’s appointment as executor is revoked. Considering that no such language is given in s. 6(8) of the FLA, it can be argued that the surviving spouse who elects in favour of equalization could continue to act as executor.
Though the anomaly was spotted almost immediately after the enactment of the FLA, it surprisingly took almost 13 years to be settled by jurisprudence. It was ruled in the case of Reid Martin v. Reid, that s. 6(8) of the FLA should mean that the surviving spouse who, on the facts, had elected in favour of equalization could not act as executor. The counter argument was thoroughly examined, but it was rejected. However, the Reid Martin decision raised other practice issues that need to be addressed.
Firstly, is it correct to draft around s. 6(8) if the client wishes to see his or her spouse retain the office of executor in the face of an equalization claim, even though he or she forfeits the other will entitlements? For example, is it okay to simply state that the surviving spouse’s appointment is effective whether or not he or she elects in favour of an equalization claim? Admittedly, subsection 6(8) provides one way around its application, that the will must state that the surviving spouse is to receive his or her entitlements under the will in addition to the entitlement under s. 5(2) of the FLA. Therefore, to preserve the surviving spouse’s right to act as an executor, but not his or her entitlement to any bequests under the will, such bequests should be expressly conditional upon the surviving spouse’s election in favour of equalization, while ensuring that such bequests are in addition to the equalization entitlement.
Secondly, how to tackle the issue of forfeiture of office by the surviving spouse as a matter of estate administration? Owing to s. 17(2) of the SLRA, the application for a certificate of appointment asks whether the testator was divorced after the date of the will. Consequent to the Reid Martin decision, the application form was amended, with effect from March 1, 2000, to enquire whether the applicant has elected in favour of equalization.
However, this will not deal with the case where the surviving spouse applies for a certificate before deciding whether to elect in favour of an equalization claim, which is not merely a theoretical concern. For example, consider a wife making her will under which her husband is appointed as one of three executors and under which he is given a life interest in the residuary estate with the remainder interest to be held in trust for the children of the marriage. It so happens that a week before her sudden death, the wife entered into an agreement for the sale of a condominium apartment, with a closing scheduled for a date six weeks after her death. When she died, the wife owned some shares of a corporation that carried on a worldwide business. Calculation of the wife’s NFP requires a valuation of her shares, but a proper valuation of the corporation cannot be completed until well after the closing date for the sale of the condominium. But, the sale of the condominium cannot conclude without the executors’ procuring a certificate of appointment.
Consequently, a further practice issue emerges for consideration. What would be the procedure to seek revocation of the testamentary grant to the surviving spouse who subsequently elects in favour of equalization? As the election disentitles the surviving spouse to act as estate trustee, it would be appropriate if someone, a co-executor, an alternate executor or, if neither is named, anyone who wishes to obtain a certificate of appointment of estate trustee, make an application to have the surviving spouse removed as estate trustee pursuant to the mechanism set out in s. 37 of the Trustees Act.
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).