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tax & estate
Avoiding a
dependant’s
relief claim
A recent court case illustrates the risks that come with longer lives
by Akua Carmichael, member of the estate planning and administration group at Dale Lessmann LLP in Toronto. She practises estate planning, administration and litigation. acarmichael@dalelessmann.com
As we live longer, it’s prudent to plan on a loved one requiring more support than first anticipated.
The average life expectancy for Canadian men is 79.9 years; for women, it’s 84.0 years. And those numbers are expected to rise with advances in medicine.
A recent Ontario Superior Court case — Anderson v. Anderson, 2019 ONSC 5627, which dealt with a claim for dependant’s relief — provides insight into the conse- quences of failing to adequately plan for a surviving spouse with health issues.
Case background
The man in the case died in 2004, leaving behind his son from his first marriage and his second wife of about 18 years. (The man and his second wife each had children from previ- ous marriages but none together.) The man’s will, from 1995, named his second wife as estate trustee and said she was entitled to live in his home until she died. The will also said she could sell the home and purchase another.
The man’s son, a residual beneficiary of the estate, was required to pay the taxes, insurance, repairs, mortgage and other char- ges for the general maintenance of his fath- er’s home — or a replacement — for as long as the second wife lived there.
She remained in the house until she became too ill to live there on her own, at which point she sold the house and moved into a long- term-care facility. However, she didn’t receive the proceeds from the sale. That money was held in trust by the estate, pending consent from her stepson or a court order directing the
estate to pay her expenses at the facility, which she could not afford. While the will provided for her to live in her late husband’s house for the duration of her life, it didn’t consider the scenario she now faced with her health.
She applied to a court requesting depend- ant’s support. The son’s position was that she should cover the expenses of the care facility, even though her savings were insufficient.
The court granted her motion for interim support pending the outcome of her applica- tion, reasoning that the will made it clear
that her late husband had intended to ensure she had a place to live. His resources were to be used to pay the expenses of her residence. At press time, her application was still pending.
Case takeaways
The second wife was involved in litigation with her stepson at age 89. Could this have been avoided? While there is never a guarantee an estate will be free from a claim or challenge, there are ways to minimize the likelihood.
1 Careful estate planning should consider longer life expectancy
It is common to find provisions in a will pro- viding a second spouse with a life interest in
a matrimonial home. However, it is prudent
to consider additional provisions that clearly provide for situations where the beneficiary may not be able to continue living in the desig- nated home due to health issues. Including
additional language to the effect that the testator’s estate will bear the expense should circumstances require a beneficiary to reside in an assisted care facility may be very useful. The likelihood of these situations arising more often is real since we are living longer.
2 Estate planning involving blended families requires attention to family dynamics
When it comes to estate planning, ignoring family dynamics can lead to unpleasant out- comes, including family members fighting in court. Estate assets end up being diverted to legal and court fees and, even worse, family relationships can be irreparably damaged. Planning with a neutral third party to assist in the estate administration may have resulted in a different outcome.
3 Failure to adequately plan is not an automatic bar to relief, and obtaining that relief can be costly
The financial and emotional costs of litigation are high. The wife obtained the relief she
was seeking — at least in the interim — but it came at a high cost. Her legal fees were close to $30,000, with approximately $20,000 paid out of the estate. She probably would have liked to avoid a court battle, particularly at her age. And the man and his son would likely have preferred a different outcome as well.
There really is no substitute for thought- ful estate planning. This case is a helpful reminder why. AE
PHOTO: SSTURTI / ISTOCKPHOTO; ICONS: ISTOCKPHOTO
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FEBRUARY 2020