Inclusion/exclusion of assets in net family property of deceased
By Saman Jaffery
In the recent decision of Laframboise v. Laframboise, the Ontario Superior Court of Justice considered, in the context of a family law claim against an estate, whether a lump sum pension payment payable to an Estate (rather than a designated beneficiary) should be included in the net family property (the “NFP”) of the deceased.
Pursuant to s. 5 and s. 6 of the Family Law Act (the “FLA”), a surviving spouse is entitled to make an election to receive her entitlement under the will or to receive her entitlement under provisions of the FLA allowing for equalization of property.
A surviving spouse must make the election within six months of the death, unless the time is further extended. Specific provisions are made in s. 6(6) and 6(7) of the FLA for circumstances in which a surviving spouse elects to receive an equalization of property, but where the surviving spouse also receives funds as a result of the death of deceased spouse (i.e. as a beneficiary of a life insurance policy, as a beneficiary of a death benefit under a pension plan, or through right of survivorship).
Pursuant to s. 6(7) of the FLA, such funds received by the surviving spouse are generally credited against the surviving spouse’s entitlement to an equalization of property.
In Laframboise, the deceased left a will in which the bulk of his estate was left to his parents and siblings. The deceased’s will made no provision for his wife, from whom he was allegedly separated at the time of his death.
The issue to be decided in the application before the court was whether a pre-retirement death benefit (“death benefit”) payable to the deceased’s estate from the Ontario Teachers’ Pension Plan following his death should be excluded or included in the NFP of the deceased.
The wife argued that as the FLA was silent on the treatment of the death benefit to the estate, it should be included in the deceased’s NFP and, therefore, subject to equalization.
The court dismissed the wife’s application, and decided that the death benefit was not an asset of the deceased subject to equalization. Madam Justice Hennessy held, as follows:
The assets which must be included in the NFP for the deceased for the purpose of calculation of an NFP are those which exist as of the valuation date. In this case, the valuation date will be either the date of separation or the date before the day on which one of the spouses dies leaving the other spouse surviving (see s. 4 FLA). As of the day before the date of death, [the Deceased] neither owned the asset in question nor was he entitled to it.
Madam Justice Hennessy further held the FLA did not support the proposed interpretation that the payment of the death benefit to the estate be used against or to offset any amount owed by a surviving spouse after the calculation of the NFP.
She stated thatthe FLA seeks an equitable distribution of assets as between spouses, but not between a surviving spouse and the estate of the predeceased spouse. Read Toronto Estate Law Blog