Inheritance rights: Common Law vs. Married Spouse

Common Law inheritance

Common Law inheritance

Part 1: “What is the Best Way to Protect my spouse?”

The best, and likely the least expensive, way to provide for your loved one(s) in case of your death is to have a Will prepared. A Will allows you to direct how your personal and real estate property is to be distributed on your death. When a person dies without a Will, referred to as dying intestate, the rights and entitlements of a surviving common-law spouse are NOT the same as legally married spouse.   

Part 2: “When a legally married spouse dies without a Will, what inheritance rights does the surviving spouse has?”

In Ontario, two separate acts, the Ontario Family Law Act (FLA) and the Ontario Succession Law Reform Act (SLRA), set out the legislative structure to protect the inheritance rights of legally married surviving spouses. The structure is set up to require a surviving spouse to choose whether to seek inheritance rights and entitlements under the FLA or under the SLRA. To make a well-considered choice, I recommend seeking advice from a competent estates lawyer to calculate the expected inheritance under each Act.

Option (A): Inheritance Rights under the Ontario Family Law Act (FLA) legal structure

Under the FLA a surviving married spouse is entitled to seek an equalization payment from the estate of the deceased spouse. Which means that the surviving married spouse is entitled to seek and receive half of the difference between her net family property and that of the deceased’s spouse. The net family property is calculated by considering all the assets and liabilities each spouse had on the date of marriage and the date of death. This analysis takes into consideration all the assets and liabilities of both spouses, including those that are shared, on the date of marriage compared to the date of death. If the deceased had more, then half the difference is directed to be paid to the surviving married spouse as an inheritance.

To offer an example, consider this scenario. On the day that Bonnie and Clyde were wed, Bonnie’s net worth, all her assets, and liabilities considered was $50,000, while Clyde’s net worth was $10,000. After years of a happy marriage, Clyde died having accumulated $910,000 in assets, with a fully drawn joint line of credit with Bonnie in the amount of $10,000. When Clyde died, Bonnie’s assets amounted to $550,000, while her only liability was a fully drawn joint line of credit with Clyde for $10,000.

On these facts,  Clyde’s net worth on his date of death would be $895,000 ($910,000 [date of death net worth] – $10,000 [date of marriage net worth] – $5,000 [half of fully drawn joint line of credit]), while Bonnie’s net worth would be $495,000 ($550,000[date of Clyde’s date of death net worth] – $50,000 [date of marriage net worth] – $5,000 [the other half of fully drawn joint line of credit]. So, on the date of his death, Clyde’s net worth was $400,000 greater than Bonnie’s. If Bonnie chose to seek an equalization payment to receive her inheritance under section 5 of the FLA, she would receive a payment in the amount of $200,000 ($895,000 – $495,000 = $400,000/2).

Option (B): Inheritance Rights under the Succession Law Reform Act (SLRA) legal structure

Under the SLRA the amount that a surviving spouse is entitled to receive depends on whether the deceased spouse is survived by children, including those conceived before and born after the date of death, or children of such children. If there are no children or grandchildren, a surviving spouse is entitled to receive all personal and real estate property of the deceased. If there are children, a surviving legally married spouse is entitled to receive the first $200,000 out of the estate, referred to as the preferential share. The distribution of the remainder of the estate depends on how many children survive the deceased spouse.

inheritance

Using our Bonnie and Clyde scenario consider the following:

Surviving Legally Married SpouseSurviving ChildrenEntitlement Amount to the surviving legally married spouse
Bonnie survivesNo childrenBonnie receives the entire estate

$910,000

Bonnie survives1 child, or children of this child.Bonnie receives $555,000, which includes the preferential share and half of the remaining estate.
Bonnie survives2 children or more, or children of these children.Bonnie receives $436,666, which includes the preferential share and 1/3 of the remaining estate

From this calculation, Bonnie is better off relying on SLRA to claim her inheritance.

Part 3: “When a common-law spouse dies without a Will, what inheritance rights does the surviving common-law spouse has?”

In Ontario, under the SLRA, a common-law surviving spouse has no rights to inherit real or personal property from their spouse who died without a will. If a surviving spouse was dependent of the deceased at the time of his/her death and can prove that the deceased has not made adequate provisions for him/her, then a surviving common-law spouse may sue the estate and ask to receive dependent’s support. Ultimately, it would be the court that decides the amount, if any, and the duration of any support that may be awarded to the surviving common-law spouse. That determination is based on various factors, including the age of each spouse, the health of the surviving spouse, the length of the relationship, the age of any children of the deceased, and others.

Alternatively, or in addition to a claim for support, a common-law spouse may sue the estate for unjust enrichment to the estate for the actual financial contribution the surviving common-law spouse made during the relationship to an asset that only the deceased spouse owned. We will explore this topic at another time.

Common-Law Spouse

If you are looking to find out more about your rights and entitlements as a surviving spouse, or to have your will prepared, the Wills & Estates Team at Hummingbird Lawyers will be happy to assist you.

Thank you for reading.

Ioulia V. Vinogradova

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Ioulia Vinogradova

Ioulia is an Associate Lawyer with the Hummingbird Lawyers Wills & Estates practice group. Ioulia has a diverse legal background that includes estate, family and civil litigation and real estate practice.

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