( Disponible en anglais seulement )
What happens when someone dies after they have separated and before they have divorced or settled the matrimonial property issues? Does the death of one of the parties end the divorce proceedings? How is the property divided? What can a person going through a divorce do to ensure their soon-to-be former spouse does not receive more than what was intended? These are questions estate planners and family law lawyers are often asked. This article provides a brief overview of how an estate could be distributed if a party dies during divorce proceedings.
Archie married Veronica in 1989. The parties separated in 2017. At the time of their separation, they had two adult children, Maggie (26) and Betty (24). Veronica commenced the divorce proceedings by filing a Statement of Claim in 2017. In January of 2018, Archie updated his will. He named his brother, Jughead, as the personal representative of his estate and gave the remainder of his estate to his children, Maggie and Betty. Archie dies in March of 2018. As of the date of his death, Archie and Veronica do not have an agreement with regard to the division of the matrimonial property.
As the personal representative of the estate, Jughead applies to the court for a grant of probate. As part of the application, he is required to serve notices on Veronica. The notices provide Veronica with the details of her rights and advise her she has 6 months from the date of the grant of probate being issued to make an application for a share of Archie’s estate under the Matrimonial Property Act and/or the family maintenance and support provisions of the Wills and Succession Act. After this period has lapsed, if a claim is not made by Veronica, Jughead, as the personal representative of the estate, can distribute the property in accordance with the terms of Archie’s 2018 will.
The assets of Archie are as follows:
- House owned as joint tenants with Veronica
- Registered Retirement Savings Plan (RRSP)
- Tax Free Savings Account (TFSA)
- Non-registered investment account
- Chequing account and a savings account
- Life insurance policy which names Veronica as the beneficiary
With regard to the house which is jointly owned with Veronica, the house is transferred to Veronica by right of survivorship. This means the asset does not form part of Archie’s estate and his interest in it is extinguished upon his death. If the house had been owned as tenants in common with each having a 50% interest in the home, Archie’s interest would have formed part of his estate. In order for this to have occurred prior to Archie’s death, both parties would have had to agree and sign the transfer to transfer the property into tenants as common. As this was not done, Veronica receives full title to the house, despite any contrary intention Archie may have had.
Similarly, as Archie did not change the beneficiary designation on his life insurance policy after separating from Veronica, the life insurance is given to Veronica. The insurance funds proceeds will not be included as part of the estate or the matrimonial property claim and Veronica will receive these funds. If Archie did not want Veronica to receive this life insurance, he should have changed the beneficiary designation on the policy. The same is true for the RRSP and the TFSA. If Veronica is the designated beneficiary, she would receive these funds separate from the estate or the matrimonial property claim. Archie would need to have designated his desired beneficiary on these registered accounts prior to his death to ensure that his wishes would be carried out.
With regard to the remainder of Archie’s property, Archie’s death does not end the matrimonial property division. This means that, although Archie willed his estate property to his children, Veronica has the right to make a claim for a share of his estate. If she is successful, Veronica will receive the same amount from Archie’s estate as she would have had Archie not died during the divorce proceedings.
Apart from the legal issues discussed above, the parties also need to consider the relationship between Veronica and her two children. With Archie’s will providing the residue of his estate to his children there could be conflict between Veronica and her two children. If the parties are agreeable, they can resolve the matrimonial property issues outside of the Court. The goal of the family should be to continue to have a relationship after Archie’s property has been divided and distributed.
In addition to the relationship, the parties need to take into consideration the costs of litigating this matter. If the matter were to be litigated, the Court could order that all legal costs of the party be paid from the estate. Since the will as it was drafted was an error of the testator, the courts may order the legal fees of the personal representative, the lawyer or lawyers representing the children and Veronica’s fees, to be paid from Archie’s estate. This may leave the children as the residuary beneficiaries with significantly less than they would have received if they had negotiated a settlement with Veronica.
The example above is only meant to provide an overview of some potential issues that may arise if a spouse dies before divorce proceedings are finalized. Moreover, this article focuses on the law in Alberta. The law in other jurisdictions may be different. At Miller Thomson, we have significant experience with estate planning and planning for individuals who have complicated situations. We would be pleased to navigate you through the tax, financial and other considerations and assist in planning to prevent any disputes amongst your beneficiaries.
