Why Extra Planning is Necessary in Ontario
More and more Canadians are choosing to spend their lives together without getting legally married. While societal attitudes toward common law relationships have certainly evolved over the last few decades, the laws in Ontario relating to estates and inheritance have not changed much at all.
Understanding what happens under Ontario law if either you or your common-law partner dies will allow you to take the steps necessary to protect each other before it is too late.
The Basics of Testamentary Freedom
In Ontario, testamentary freedom is very much respected, subject to some important limitations under the law. Generally, you are free to leave your assets to whomever you choose, unless:
a) during your lifetime, you were under a legal obligation to financially support someone; and
b) you failed to make adequate provisions for that person after your death.
For example, if you are married, upon death, Ontario law states that your spouse has the right to take what is left to them under your Will or to elect to receive what they would have been entitled to if you had gotten divorced prior to your death. On an intestacy (if there is no Will), that spouse would be entitled to a sum of $200,000 (called the preferential share), and either the entirety of the remaining estate, if you had no children, or a ½ or 1/3 share of the remaining estate, depending on the number of children left behind.
What Does “Common Law” or “Spouse” Mean Under Estate and Succession Laws?
It is important to understand that, in Ontario, a common law spouse does not have an automatic right to inherit any of the assets of their partner. That right is reserved for married couples only.
Although other provinces, such as British Columbia or Alberta, may afford common law spouses the same rights as married couples, this is not the case in Ontario. What is meant by “spouse” can vary by province and can vary depending on the context. In Ontario, an individual is considered a spouse for family law support purposes, if they have cohabitated continuously with their partner for a period of three years or are in a relationship of some permanence and have a child together. For tax purposes, CRA considers a couple “common-law”, if they have been living together for at least one year.
Intestacy and the Common Law Spouse
As discussed above, testamentary freedom still plays an important role in the context of a common law relationship.
If there is no Will, however, and you were not legally married to your spouse, Ontario law provides that your estate will be distributed in the following order:
a) to any issue (children, grandchildren, etc.);
b) to parents;
c) to siblings;
d) to nieces and nephews;
e) to remaining blood relatives, by degree of blood relationship; and
f) to the Crown.
You will note that common law spouses are not included in this list. Common law spouses that were financially dependent on the deceased prior to death may be able to make a claim for financial support, but this would require your partner to take steps to bring an action against your estate.
How Can You Protect Your Common Law Spouse?
The most effective way to ensure that your partner receives your assets is to write a Will that makes it clear that your intent is for them to inherit the assets of your estate.
In addition, reviewing the ownership structure of assets you and your partner own is crucial:
• If you have purchased a home together, review the title documents/deed in order to determine how ownership was registered on title. A home held in joint tenancy with right of survivorship passes automatically to your partner upon your death, regardless of your marital status. The same is true for any joint bank accounts that you may have opened together.
• You should also review RRSP/RRIF policies, life insurance policies, and TFSA accounts. You can designate an individual as a beneficiary to these specific assets, which means that, upon death, the assets do not form part of your estate, but instead, pass automatically to that beneficiary. Therefore, it may be worthwhile to review your estate plan to decide whether your common law spouse should be designated as such.
In terms of inheriting assets, being “common law” doesn’t afford any special status in Ontario, no matter how long you have been together. For that reason, it is crucial that if you are in a common law relationship that you review and update your estate plan to ensure that your partner is protected in the event of your death.
Susanne Greisbach is an Associate with BrazeauSeller.LLP. She practices in the areas of wills, estates and tax law. Susanne can be reached at 613-237-4000 ext. 245 or firstname.lastname@example.org For more information about Susanne, please visit www.brazeauseller.com.