Divorce Considerations on Estate Planning in Ontario

As some people may know, marriage revokes an existing Will, except when the existing Will declares that it is made in the contemplation of marriage. When a new couple gets married, buys a house, and has children together, it is common to have Wills drafted together along the way, also called Mirror Wills. However, some couples remain confused about what happens to their estate planning documents if their marriage breaks down. In this post, we will review how your Will is affected upon divorce or separation.

First, it is important to note the difference between separation and divorce.

Separation: Spouses are considered “separated” under the Ontario Family Law Act when they live separately and apart with no reasonable prospect that they will resume cohabitation. Separated spouses may share common accommodation (still live in the same house) as long as they live independent lives. Separated spouses may enter into a separation agreement and new relationships, but may not remarry.

Divorce: A “divorce” legally ends the marriage and allows former spouses to remarry. The grounds for divorce are marriage breakdown, and the court will grant a divorce if it is satisfied that there is no possibility of the reconciliation of the spouses.

Some couples may not wish to enter the formal process of a court-ordered divorce, so they will merely agree to break up and reduce their agreement to writing in a separation agreement. No matter under what circumstances your marriage dissolves, it is important to note the difference in how separation and divorce are treated for estate planning purposes.

A separation does not affect your Will. If you and your spouse are separated at the time of death, your spouse may still receive your property under your Will. The surviving spouse will maintain his or her entitlement under the Will and other estate planning documents after separation unless the Will has been changed.

If there is no Will, the separated spouse will come under the definition of “spouse” and be entitled to inherit the deceased’s estate accordingly to the laws of intestacy. Currently, a surviving spouse is entitled to the entire estate absolutely if the deceased has no children. If the deceased has children, the surviving spouse is entitled to a preferential share ($200,000) and an equal portion of the balance of your estate.

It is advisable to have a separation agreement in place, which specifically addresses what, if any, rights each spouse is to have on the death of the other.

Despite what you may think, a divorce does not automatically revoke your Will. Instead, a divorce will only automatically revoke the parts of your Will that deal with your former spouse. All other provisions in your Will or other estate planning documents that do not deal with your former spouse remain intact after divorce. The Will is treated as though the former spouse predeceased the testator.

What this does is invalidates any gifts bequeathed to your former spouse. Any specific gifts will fall into the residue of your estate. If the former spouse is entitled to the residue (the assets left over after the debts are paid and other specific gifts distributed), it will then fall to the alternate beneficiary. If no alternate is named, then intestacy will result and the estate assets will be distributed as described above.

As well, if your former spouse was named as the estate trustee in your Will, a divorce will revoke the appointment of the former spouse as estate trustee. Again the alternate will be appointed, and if no alternate is named, intestacy will result. For example, if you named your former spouse as estate trustee of your estate and your brother as an alternate, your brother will have the right to be appointed estate trustee.

However, if no alternate is named in your Will, the rules of intestacy will govern. Your estate will be treated as though there was no will. With respect to the estate trustee, a next of kin must apply to the court to be appointed estate trustee. With respect to your estate, it will be distributed according to the laws of intestacy as they apply.

Whether you are separated or divorced from your spouse, it is advisable to review and update your estate planning documents. An additional concern relates to powers of attorney for property and personal care. If your former spouse has been named power of attorney, you may want to revoke or replace these documents.

There are other assets that may not be dealt with properly in a Will or other estate planning documents, but should be reviewed when a relationship breaks down:

1) Beneficiary designations such as RRSPs, RRIFs, TFSAs, and insurance policies should be reviewed and changed where desirable;

2) Jointly held property, unless owned as tenants-in-common, belongs to the last of the two owners to die by right of survivorship. So if you jointly own property with a former spouse, it will flow to them on your death, even after divorce; and

3) Guardianship clauses can be important in your Will. Although the parents of the child have custody of any children, ensure to update who will take custody of your minor child if both parents are deceased.

In conclusion, divorce or separation may not just affect you, but your children and other members of your family. There are many more considerations that may come into effect upon the breakdown of a marriage. Make sure to talk to an estate planning professional to understand all of the legal and personal considerations that affect you and your family.