Equalization of net family property after a spouse dies
By Kirsten McMahon, AdvocateDaily.com Managing Editor
Many people do not know that upon the death of their spouse, they can either receive an inheritance under the will or claim an equalization of net family property, says Toronto wills and estates lawyer Lisa Laredo.
Laredo, principal of Laredo Law, says equalization is the division of the net family property following the breakdown of marriage either by death or separation.
“The right of a surviving spouse to an equalization of net family property after the death of his or her spouse is set out in s. 5(2) of the Family Law Act (FLA),” she says, noting that common-law spouses do not have the same right.
“That said, the surviving spouse must take the utmost care in deciding whether a claim for an equalization of net family property is appropriate,” Laredo tells AdvocateDaily.com.
Sections 6(1) and 6(2) of the FLA provide that the surviving spouse in a marriage shall elect to receive an inheritance under the terms of the will. If there is no will, the surviving spouse is entitled to a preferential share of the value of the estate, now set at $200,000, and the balance, if any, is divided among the spouse and children as set out in Part II of the Succession Law Reform Act (SLRA).
However, Laredo says the surviving spouse can instead elect to receive an equalization of the net family property under s. 5(2) of the FLA.
If no application is filed within six months of the death, then the surviving spouse is deemed to have elected to take the inheritance under a will, or in the case of intestacy, under the SLRA, she says.
“Because of the time that may be necessary to determine the net family property of the deceased, a limitation period of six months to make an equalization claim is an extremely short amount of time,” Laredo says.
In most cases, she says a spouse’s entitlement has priority over many gifts made in the deceased’s will such as a person’s rights to a share of the estate under the law of intestacy or an order made against the estate for support of a dependant unless it is a child.
She says the solicitor of the estate should advise against distributing the assets before six months in the event an equalization claim is made.
“It’s beneficial to speak with a family lawyer to advise on equalization because it can be a very lengthy process. Also, if the surviving spouse is the estate trustee, then he or she should seek independent legal advice because you cannot elect under the FLA and be the executor,” Laredo explains.
This is the second instalment of Laredo’s three-part series on family law issues in the context of estate administration. Stay tuned for part three, where Laredo will discuss rights to the matrimonial home.
To read part one, where Laredo discusses estate administration and blended families, click here.