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The Companion Advisor: Taxes & Estates
Blind Sided by a Support Claim

By Suzanne Michaud and Bonnie Yagar
Pallett Valo LLP Lawyers & Trade-Mark Agents
A Companion Advisor article

It happens. Due to changing and volatile family relationships, an estate and its Estate Trustees/Executors can often be blind sided by a claim for support against the estate. Such claims will arise when the person who has died has either died without a Will or has ignored their legal obligations by not including provision in their Will for someone for whom they ought to have provided.

In Ontario, the Succession Law Reform Act is far reaching in its application of social policy because it creates a legal right to support of a dependant of a deceased. By this law, a Court may order such provision as it considers adequate out of the estate of the deceased for the proper support of his or her dependants or any of them.

`Estate' Definition Expanded

So reading this newsletter you may think, "Oh well, he and I or she and I own all of our property jointly and we are designated as beneficiaries on each other's life insurance and registered funds. If one of us dies, of course, the other one will inherit all of these assets. There will be no `estate', so we don't need to be worried about these types of claims".

This type of thinking is misguided, as the Succession Law Reform Act deems the value of
certain transactions made by the deceased before death to be part of the net value of his or her estate. The definition of `the estate' is expanded to include monies or other property deposited into joint accounts, amounts paid under life insurance policies owned by the deceased and any amounts payable under a designation of beneficiary on pension and retirement plans. The estate is larger than you may think for these types of claims. Possible dependants of yours cannot be ignored in your estate planning.

Who Is A Dependant?

In Ontario, the Succession Law Reform Act is far reaching in its application of social policy because it creates a legal right to support of a dependant of a deceased.

The definition of `dependant' is: a spouse (present or former, legal, common-law, or same sex), parent or child (being an actual child, grandchild or one treated as a child of the family), or a brother or sister of the deceased. A dependant is a person to whom the deceased was either

i.	providing actual support or
ii.	under a legal obligation to provide support, immediately before his or her death.

The providing of support does not mean simply a monthly cheque but could take the form of providing a car, providing room and board, paying off debts and credit cards or interim gifts of money to any one or more of this group.

Once a claim has been established, how does a judge decide how much to award? There is a list of 19 factors in the legislation which include the following:

i.	the closeness and duration of the relationship between the deceased and the dependant;
ii.	any contributions made by the dependant to the deceased's welfare, assets or career;
iii.	any agreement between the deceased and the dependant; and
iv.	any gifts or other transfers made between the two voluntarily or by court order.

Avoiding Messy Legal Battles After Death

So how are you to be proactive in dealing with these possible claims against your estate so that you do not leave your Estate Trustees and beneficiaries in a messy legal tangle after your death?

i.	You should choose legal and other professional advisors with the appropriate experience and qualifications to help you plan. These advisors need to be people that you can trust and be open with in order that you can give them all details of any situation or possible claims you are concerned about.
ii.	If the claim you are concerned about arises from a former spouse or children from a prior relationship, it may be that there is a written separation agreement or court order which will govern the situation. If that is the case, you need to have those documents reviewed by your legal advisor and make sure that you are complying with them to the letter.
iii.	Another strategy is to be thoughtful and proactive in your Will. Your Will can be structured with wording to discourage the making of a claim against your estate although such wording is not always a guarantee that such a claim will not be successful. You may direct that part of the proceeds of your estate be used to purchase an annuity insurance product which will pay out a monthly amount to your dependant for a set amount of time or for the balance of his or her life. These products can be purchased with a guarantee so that any unused funds can revert back to your estate or to another agreed upon recipient.
iv.	When you are contemplating buying a new property, you should consider from. the outset whether it should be purchased in joint ownership with right of survivorship or not. A subsequent transfer from your sole ownership into joint ownership is subject to attack under this legislation and the property could fall into the definition of your estate.
v.	Another option is the use of life insurance to create a larger estate for liquidity purposes. You can use the additional funds to set up a trust fund to provide for the needs of your dependant which your Estate Trustees control rather than having a lump sum paid out to that dependant through a claim against your estate.
vi.	In the event of your death, if you intend your new spouse to have certain life insurance proceeds paid to him or her, he or she should be the owner of the policy on your life and pay for it out of their own funds. This approach would appear to protect the policy from being drawn into the expanded definition of your estate.

Conclusion - Post Death

If you do not take any of these steps and a claim is made against your estate after your death, your Estate Trustees would be well advised to apply for immediate probate of the Will as such claims generally need to be brought within 6 months of the probate of the Will. If the Estate Trustee delays or thinks that it is not necessary to probate the Will, this lack of probate leaves it open ended as to when a claim can be made. If such a claim is validly made on a timely basis, lawyers often are recommending the use of mediators to attempt to settle the dispute rather than the court process. If you think that you or someone in your family has a situation which would benefit from further legal advice in this matter, please contact us for an appointment to discuss it further.

Suzanne Michaud heads the Wills and Estates department at Pallett Valo, LLP She works with clients and their other advisors in the areas of estate planning and administration. Suzanne is also the Estate Planning Consultant with Zurich Canada, providing continuing education and case consultation to Zurich's brokers partners across Canada.

Bonnie Yagar concentrates her practice on estate planning and administration, Wills, and the resolution of contentious estate matters. She assists individuals with structuring their personal assets to maximize the benefits in wealth transfer. Bonnie has a particular expertise in estate planning for families with disabled beneficiaries. She is very involved in the for Peel Activities and Rehabilitation (PAR).

Notice: Fiscal Agents Financial Services Group are not engaged in rendering tax, accounting or legal professional services or advice. The comments in this article are not intended, nor should they be relied upon, to replace specific professional advice. Before acting on material contained herein. Readers should seek advice that is appropriate to their personal circumstances from a professional advisor.

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