Support for Common Law Spouses under the Succession Law Reform Act

When a person dies, his or her common law spouse is usually entitled to make a claim for support against the estate of the deceased partner, much like the situation between living spouses after a separation.

Where the true nature of the relationship is in dispute, whether or not a person qualifies as a common law spouse can be a difficult issue. The issue is even more difficult when one of the parties to the relationship has died and therefore is not available to describe how the parties felt about each other.

Like many aspects of common law relationships the guidelines that the courts have developed in these kinds of cases might surprise many people.

Entitlement

In order to qualify for support from the estate, the claimant must establish that he/she is a dependent and that the person who died, with or without a will, has not made adequate provision for the proper support of the claimant.

If the claimant can establish this the Court has broad powers to order that the estate pay such support as the Court considers adequate out of the estate of the deceased for the proper support of the claimant. The court can make this support order attach to a wide variety of assets, including many that would not normally be considered part of the estate.

A “Dependant” includes the spouse of the deceased, to whom the deceased was providing support or was under a legal obligation to provide support immediately before his or her death.

A “Spouse” includes people legally married, divorced, or who are not married to each other but have cohabited continuously for a period of not less than three years, or in a relationship of some permanence, if they are the natural or adoptive parents of a child.

“Cohabit” means to live together in a conjugal relationship, whether within or outside marriage.

The courts have struggled with the meaning of “cohabit in a conjugal relationship“ in this estate context. Whether or not a couple has cohabited is said to be both a subjective and objective test. What were the intentions of the parties as gleaned from the facts and how were they regarded by others?

To help Courts decide difficult cases judges of Ontario have developed a series of questions that should be considered. These questions are organized into seven descriptive components. These are as follows:

        a. Shelter:

            i. Did the parties live under the same roof?

            ii. What were the sleeping arrangements?

            iii. Did anyone else occupy or share the available
                 accommodation?

        b. Sexual and Personal Behaviour:

             i. Did the parties have sexual relations? If not, why not?

             ii. Did they maintain an attitude of fidelity to each other?

             iii. What were their feelings towards each other?

             iv. Did they communicate on a personal level?

             v. Did they eat their meals together?

             vi. What, if anything, did they do to assist each other
                  with problems or during illness?

             vii. Did they buy gifts for each other on special occasions?

        c. Services:

             i. What was the conduct and habit of the parties in relation to:

                 1. preparation of meals;

                 2. washing and mending clothes;

                 3. shopping

                 4. Household maintenance; and

                 5. any other domestic services?

        d. Social:

            i. Did they participate together or separately in neighbourhood
               and community activities?

           ii. What was the relationship and conduct of each of them toward
               members of their respective families and how did such
               families behave towards the parties?

        e. Societal:

            i. What was the attitude and conduct of the community toward
               each of them and as a couple?

         f. Support (economic):

            i. What were the financial arrangements between the parties
               regarding the provision of or contribution towards the
               necessaries of life (food, clothing, shelter, recreation,

               etc.)?

           ii. What were the arrangements concerning the acquisition and
               ownership of property?

          iii. Was there any special financial arrangement between them
               which both agreed would be determinant of their overall
               relationship?

         g. Children:

            i. What was the attitude and conduct of the parties concerning
               children?

Judges and Courts have recognized that “The extent to which the different elements of the  relationship will be taken into account must vary with the circumstances of each case.” For example:

        Cohabitation does not necessarily depend upon whether there is
        sexual intercourse.

        Cohabitation does not require that the parties were even living
        under the same roof. They might have maintained separate
        residences throughout their relationship.

        How the parties describe their relationships in income tax returns
        and other government documents is not determinative.

        The three year period of cohabitation does not have to continue
        up to the time of death.  In a perhaps extreme example a man
        was found to be entitled to support from the estate of another
        man with whom he had lived in a same-sex relationship for
        some years, even though the claimant had met, become
        intimate with and married a woman before the death of the
        other man, and was charged and later acquitted with the murder
        of the other man. [Romero v Estate of Naglic et al, 2009
        CarswellOnt. 3193]

Interim support

The Court also has the power to make an order for interim support before the trial. The test for interim support is for the claimant to establish some degree of entitlement to, and the need for, interim support. On an interim motion a court can weigh and assess the evidence, to the extent permitted by the nature of the evidence and any pre-hearing testing of it. If, after such assessment, the motions court concludes that the record contains credible evidence from which one could rationally conclude that the applicant could establish his claim for support, then an order for interim support may issue.

Amount of Support

If the claimant can establish an entitlement to support from the estate the Court will then decide how much and for how long support should be paid. The statute sets out a long list of factors to be considered. Some of these factors are:

        the dependant’s current assets and means;

        the assets and means that the dependant is likely to have in the
        future;

        the dependant’s capacity to contribute to his or her own support;

        the dependant’s age and physical and mental health;

        the dependant’s accustomed standard of living;

        the proximity and duration of the dependant’s relationship with the
       deceased;

        whether the dependant has a legal obligation to provide support
        for another person;

        any agreement between the deceased and the dependant;

        if the dependant is a spouse,

            a course of conduct by the spouse during the deceased’s
            lifetime that is so unconscionable as to constitute an
            obvious and gross repudiation of the relationship,

            the length of time the spouses cohabited,

            the effect on the spouse’s earning capacity of the
            responsibilities assumed during cohabitation,

            whether the spouse has undertaken the care of a child

            any housekeeping, child care or other domestic service
            performed by the spouse for the family,

       any other legal right of the dependant to support, other than out
       of public money.

The reference to the claimant’s “accustomed standard of living” means the standard of living established by the deceased while the parties cohabited.

Paying the Support – the Estate

The court can order such a support order to be paid out of a wide variety of assets, including many that would not normally be considered part of the estate. These assets might include:

        (a) certain gifts that the deceased made to other people before
        death;

        (b) money deposited in an account in the name of the deceased in
        trust for another person;

        (c) joint bank accounts;

        (d) jointly owned homes, cottages or other real property;

        (e) monies held in a trust fund;

        (f) insurance policies, group insurance; and other monies normally
        governed by a designation of beneficiary

Timing

Perhaps the last but very important consideration is a matter of timing, because the statute states that …”No application for a [support order] may be made after six months from the grant of letters probate of the will or of letters of administration.”

SO if you think you might make such a claim, don’t wait too long !!

  - Craig M. Bater for abblaw.ca

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

Grandparent Rights in Custody Cases

When we talk about access, which includes the right to see a child, we tend to think only in terms of the rights of the child’s parents. However, as the number of families affected by divorce increases, extended family members, including grandparents, begin to worry about their relationship with their grandchildren and whether or not they will play a meaningful role in their grandchildren’s lives. This becomes a very real concern for grandparents if their own child is not the custodial parent.

In the Province of Ontario, there are two pieces of legislation that govern the issue of access – the Divorce Act (which applies only to children of a marriage) and the Children’s Law Reform Act. There is no language in either Act that specifically refers to grandparents. However, the Divorce Act states that a court may make an order for custody or access on the application of either of the spouses, or by any other person. A grandparent would fall into this category, but they must first seek the court’s permission to bring an application for custody of or access to their grandchild. The Children’s Law Reform Act allows a parent of a child or “any other person” to apply for an order respecting custody of or access to a child (permission from the court to bring an application is not a prerequisite under the Children’s Law Reform Act.)

In Ontario, there is no presumptive right to access for grandparents or other people outside of the children’s own parents. The courts have taken the position that a child’s relationship with their grandparents is expected to be fostered and maintained through the grandparent’s own child.

Since 2001, the Ontario Court of Appeal has stated it is up to the children’s parents to decide if and when certain people should have access to their children. So long as there is no evidence the parents are behaving in a manner which demonstrates an inability to act in accordance with the best interests of their children, their wishes will be respected.

While the Ontario Court of Appeal acknowledges their approach may seem insensitive to the needs of grandparents, it is not the grandparents’ needs (or even the grandparents’ wishes) that must be viewed and examined. These cases are about the needs and interests of the children and the merits of a grandparents’ application for access to their grandchildren will hinge on the children’s best interests. There are a number of factors to consider when determining what those best interests are, including:

• the wishes of the custodial parent, especially if there is no obvious benefit to the child from ongoing contact with the grandparent;

• whether or not there is an established, ongoing and positive relationship between the grandparent and grandchild;

• whether the grandparent has or will act in such a way as to undermine the child’s parent(s) or the child’s relationship with their parent(s);

• the severity of any conflict between a grandparent and the child’s parent;

• whether the grandparent has something special to offer the child, particularly from a family or cultural point of view; and

• whether the child will experience a sense of loss and/or abandonment if the grandparent is prevented from being part of the child’s life.

In 2012 the Ontario government introduced a new Bill that aims to promote the relationship between children and their grandparents, primarily in situations where the children’s parents are separated or divorced. Bill 67, titled “An Act to amend the Children’s Law Reform Act with respect to the relationship between a child and the child’s grandparents” received its first reading on April 17, 2012. If passed, the Bill will amend those provisions in the existing Children’s Law Reform Act which govern custody and access by prohibiting parents (or anyone else entitled to custody) from creating or maintaining unreasonable barriers to the formation and continuation of a personal relationship between the child and the child’s grandparents. In fact, Bill 67 would add the child-grandparent relationship to the list of considerations the court must consider when deciding what is in the child’s best interests. Further, in applications for custody, the court would be required to consider whether the parent applying for custody is willing to facilitate contact with the child’s grandparents. Bill 67, if passed, would not automatically give grandparents the right to access to their grandchildren. They would still have to apply to the courts.

Until we have change to Ontario legislation, grandparents are still considered legal strangers when it comes to access. To have their case for access heard in court, grandparents must file an Application and an Affidavit in support of their claim for access. In addition, they must provide a police clearance certificate and a Children’s Aid Society clearance. The outcome of these cases are very dependent on the specific facts of each case, however, any person applying for custody or access to a child can be certain that, in all cases, the children’s needs will be the paramount consideration.

- Amanda M. Hall for abblaw.ca 

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

Construction Liens: The Basics for Homeowners

As a homeowner undertaking a renovation project on your property, you may or may not be aware that the title to your property could become encumbered by a construction lien. Construction liens can create serious problems when you want to sell or mortgage your property. They also can affect your credit rating. Construction liens are a very complex and technical area of law. These actions are governed by the Construction Lien Act and have many different requirements than any other court action. If you find yourself in a construction lien dispute, you should speak to a lawyer with experience in construction liens to help you deal with the situation and avoid any possible costs and delays.

What is a Construction Lien?

A lien is a security interest registered against the title to real property by a person who supplied labour or materials to your property. It can prevent you from selling or re-financing your property. It can also be a threat to your current mortgage, and your current mortgage may even have a provision requiring you to remove a lien from your title. In an extreme case, a lien claimant may be able to force a sale of your home.

Who Can Register a Construction Lien?

A construction lien can be registered by almost any person who supplied labour or materials related to construction, demolition or other improvements to your property. A lien can be registered by your contractor, a sub-contractor, or even the business from which your contractor bought your fixtures and materials.

To the surprise of many homeowners, there does not have to be a direct contractual relationship between the person who registers the lien and the homeowner.

There are two situations that commonly arise that homeowners should be aware of:

Scenario #1 – General Contractors and Sub-Trades

If you, as a homeowner, hire a general contractor to oversee the construction project and the general contractor hires a tradesperson to complete a specific aspect of the project, that tradesperson could register a construction lien against the title of the property even though there was no direct contract between the homeowner and the tradesperson.

Scenario #2 – The “Renovation-Happy” Tenant

Another example of where a construction lien might be registered against the title to a property is where the homeowner leases the property in question to a tenant. If the tenant contracts with someone to carry out work on the property and doesn’t pay that contractor, that contractor might register a lien against the home. However there are some important additional restrictions on the right of a supplier who works for a tenant to lien the owner’s title.

Timelines and Construction Liens

The right to lien a property arises when the person first supplies services or materials to the property. In order to keep a lien alive, the lien claimant must do a number of things within a number of deadlines. The lien claimant must preserve the lien, which usually means registering a claim for lien on title, usually within 45-days after the lien claimant’s last substantial supply or work. Then the lien must be perfected , which usually means starting a court action and registering proof of that on title, usually within 90 days after the last day of supply or work.

There are other deadlines and quite a few variations and exceptions to these rules. Complying with the all the requirements established by the Construction Lien Act can be complex but is essential to creating and keeping a valid lien. If the lien claimant has failed to follow the correct procedure, you may be able to get the lien taken off your title much more easily than would otherwise be the case. It is important therefore to consult a lawyer that specializes in this area as soon as possible.

How to Remove a Lien

There are two primary ways to remove a construction lien from the title to a property:

Consent and settlement

If the dispute can be settled and an agreed amount paid to the lien claimant the lien claimant can register a discharge of the lien from your title. Even if you cannot agree on how much the lien claimant should be paid, you might be able to agree to have someone else hold an agreed amount as security for the lien claim until the dispute is resolved, and have the lien clamant register a discharge of the lien.

Payment into Court

If it is not possible to reach an agreement, a property owner can pay the amount of the lien claim plus 25% as security for legal costs into court. The court will then issue an order discharging the lien against the title. An owner doesn’t even need to tell the lien claimant that he or she is going to do this.

If you have strong evidence that the lien is for an excessive amount, an owner can also ask the court to decide on a lesser amount to be paid into court. In this situation, however, you have to tell the lien claimant about your request and give the lien claimant a chance to tell the court his or her side of the story.

In both situations described above, the money paid into court, or held in trust by an agreed upon person, will be held until the lien claimant continues with the construction lien court action and the court decides how much, if any, the lien claimant should be paid.

Conclusion

Construction liens are complex, technical and time consuming. The information provided above has really only scratched the surface of the area of construction liens. There are many other aspects of construction liens that impact someone involved in a construction lien action. For this very reason, it is important to consult with a lawyer that has experience in this area as soon as possible. The team at Augustine Bater Binks LLP would be happy to consult with you on any issue with respect to construction liens.

  – Lauren M. Angle for abblaw.ca

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]  

Executor's Compensation

What is it?

Executor’s compensation is the money that is paid by an Estate to the trustee(s) or executor(s) who manage the Estate. A trustee or executor is the person appointed in a will to manage the affairs of the deceased's estate. Although those terms refer to different roles they are often used together because the same person(s) is often appointed to take on both roles. Normally, after a person dies, there are bills to pay, there are bank accounts to manage (i.e. close the existing account and open a new account in the name of the Estate), there are taxes to be paid, there may be real estate to manage or sell, there may be disputes to settle etc. When all is resolved, hopefully there will be a balance in the Estate to distribute to the beneficiaries under the will.

Some estates are large in value and some estates are small in value. Some estates are complex and require that the executors do a lot of work. Some estates are simple and don't require that the executors do much work at all. No one is expected to work for free. The question becomes, how much financial compensation should an executor receive for the work they do on behalf of a particular Estate? That is the issue known as "Executor's Compensation.”

How much should be paid to an executor?

       Should the Executor Waive Compensation?

The first point to recognize is that where the executor and the residual beneficiary are the same person there is no financial benefit (and a tax disincentive) for the estate to pay executor’s compensation. In those cases the executor would normally waive any compensation. For instance, a husband may appoint his wife as his primary executor and may also name her as the sole residual beneficiary of his will. In that case there would be no point in paying her compensation for her work as an executor. Effectively, she would be paying herself and she’d have to pay income tax on the money paid to her as executor’s compensation whereas the bequest under the will is not subject to income tax. (See Scenario #1 at the end of this article.)

      Where Executor’s Compensation is Claimed by an Executor

Where the executor claims executors compensation, how is that compensation quantified? It may be that the residual beneficiary and the executor come to an agreement as to a fair and reasonable allowance to be paid for executor’s compensation. If the parties are unable to agree upon an amount, then the executor is entitled to pass his/her accounts and in the process of passing accounts to claim executors compensation. It is then up to the beneficiaries (or some of them) to object to the passing of accounts. In Ontario a single judge of the Superior Court of Justice has jurisdiction to quantify executor’s compensation. Set out below is a summary of the legal guidelines and principles applied by the Court in fixing executors compensation.

Statutory Authority

In Ontario the statutory authority enabling the Court to permit a fair and reasonable allowance upon a passing of accounts for the effort expended in the administration of the estate is found in section 61 of the Trustee Act, which says that;

“A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the  care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice.”

The courts have developed guidelines for quantifying what is “fair and reasonable” compensation. The usual starting point is an amount equal to 5% of the estate or:

2.5% on capital receipts;

2.5% on capital disbursements;

2.5% on revenue receipts; and

2.5% on revenue disbursements.

In addition, the courts will often allow a management fee of 2/5 to 3/5 of 1% of the average annual value of the gross assets under administration.

It is also possible for the executor to request a special (i.e. additional) fee where additional compensation is required to fairly compensate the executor for the work and responsibility taken on by him/her.

The case law interpreting section 61 of the Trustee Act has developed 5 factors which are to be considered in reference to executor’s compensation on a passing of accounts:

a. The magnitude of the trust;

b. The care and responsibility involved;

c. The time occupied in performing the duties;

d. The skill and ability displayed; and

e. The success which has attended its administration.

Toronto General Trusts Corp. v. Central Ontario Railway Co. (1905), 6 O.W.R. 350;1905 CarswellOnt 449 (Ont. H.C.)

The law concerning executor's compensation is set out in Jeffery Estate (Re) (1990), 39 E.T.R. 173, 1990 CarswellOnt 503 (Ont. Surr. Ct.) at paras. 13 & 16 in the following terms:

  

“… In Ontario, at least, a practice has developed of awarding compensation on the basis of 2 ½ per cent against the four categories of capital receipts, capital disbursements, revenue receipts and revenue disbursements along with, in appropriate cases, a management fee of 2/5 of 1 per cent per annum on the gross value of the estate…. Beyond this, of course, the cautionary words of the Re Atkinson case, emphasize that the use of percentages must not become a ritual.

…

To me, the case law and common sense dictate that the audit judge should first test the compensation claims using the “percentages” approach and then, as it were, cross check or confirm the mathematical result against the five factors approach set out in Re Toronto General and Central Ontario Railway ….The process is not scientific but it is not intended to be: in the estate context, it is a search for an award which reflects fairness to the executor; in a real sense, the search is for an appropriate quantum meruit award in a unique setting.”

In the case of Laing Estate v. Hines (1998), 167 D.L.R. (4TH) 150 O.C.A; 1998 CarswellOnt 4037 (Ont. C.A.) the Ontario Court of Appeal confirmed the law as expressed in Jeffrey Estate. At ¶ 9 of the Laing case the court stated:

“A court on a passing of accounts is obliged to first test the compensation claimed by applying the percentages and then cross checking the result in reference to the five factors with a view to achieving a fair and reasonable result.”

Conclusion

The ultimate question that the court must answer is what amount is “fair and reasonable” for the work performed and the responsibilities undertaken by the executor. The answer to that question is arrived at by:

1. Applying the percentages (i.e. 5% of the value of the estate);

2. Cross checking the result of the percentage approach in reference to the five factors

3. Using a broad brush approach rather than a fine calculation approach in considering the result.

Note:

Executor compensation issues can be very complex. Should such issues arise it is recommended that a lawyer be consulted to deal with the factual and legal circumstances of a particular case.

 

Scenario #1

The testator dies leaving an estate with a value of $1.0M. The testator appoints his wife as executor and she is the sole residual beneficiary of the estate.

If the wife did not take any executor's compensation she would receive $1.0M as residuary beneficiary.

If the wife took the normal executor’s compensation of 5% of the value of the estate as executor's compensation she would receive $50K as executor’s compensation and the balance of the estate ($950K) as residuary beneficiary. Note however that executor's compensation is taxable income (as wages) and therefore the wife would have to pay income tax on the $50K of say $20,000.00. In this case, as a result of claiming executor’s compensation, the wife would receive $980K (after tax) rather than $1.0M.

Logically therefore, where the executor and the sole residual beneficary are the same person, the executor will waive their entitlement to compensation and none will be paid.

Scenario #2

The testator dies leaving an estate with a value of $1.0M. The testator appoints his brother as executor. The testator’s wife is the sole residual beneficiary of the estate.

If the brother did not take any executor's compensation the wife would receive $1.0M as the residuary beneficiary.

If the brother asked for and the wife agreed to executor’s compensation of 5% of the value of the estate as executor's compensation the brother would receive $50K as executor’s compensation and the balance of the estate ($950K) would be paid to the wife as residuary beneficiary. The brother would have to pay tax on the executor’s compensation he received.

Scenario #3

The testator dies leaving an estate with a value of $1.0M. The testator appoints his brother as executor. The testator’s wife is the sole residual beneficiary of the estate.

The testator’s brother seeks the normal executor’s compensation of 5% of the value of the estate as executor's compensation. The testator’s wife objects to the brother receiving $50,000.00. The brother passes his accounts and the court applies the percentages and then the 5 factors to determine if the compensation is fair and reasonable. The brother may receive $50,000.00 or he may receive less depending upon the view of the Court as to what is “a fair and reasonable allowance”.

Scenario #4

The testator dies leaving an estate with a value of $100K. The testator appoints his brother as executor. The testator’s wife is the sole residual beneficiary of the estate.

The testator’s brother seeks the normal executor’s compensation of 5% of the value of the estate as executor's compensation plus a special fee due to the large amount of work involved in this particular estate. In this case the amount payable by applying the percentage approach is only $5,000.00. The testator’s wife objects to the brother receiving more than $5,000.00. The brother passes his accounts and the court applies the percentages and then the 5 factors to determine if the compensation is fair and reasonable. In this case it may be that matrix of quantum of the estate and quantum of work required of the executor justifies an additional payment. Again, it depends upon the view of the Court as to what is “a fair and reasonable allowance”.

-- Philip W. Augustine for abblaw.ca

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

Mediation and its Benefits

When a client thinks of hiring legal counsel to work on his or her behalf, thoughts of a lawyer in court objecting with conviction to everything said by the opposing party may come to mind. Hollywood movies such as The Rainmaker, A Few Good Men and many others would lead one to believe that this is “good advocacy.”

In reality, over 90% of cases in Ontario’s civil court system never make it to trial. This not only means that lawyers in Ontario have found ways to settle disputes outside of court, but it also means that lawyers across the province have suffered from a gradual decline in opportunities to be told by witnesses that they “can’t handle the truth.”

One of the tools often used to settle disputes out of court is mediation. Mediation is a consensual meeting between all of the interested parties in a dispute and a neutral third-party known as a “mediator.” The mediator is not a judge and has no power to ultimately decide or rule on the matter. Instead, the mediator’s role is to assist the parties in arriving at a fair and meaningful settlement. Mediation is but one of several commonly known processes under the umbrella of Alternative Dispute Resolution (ADR). Other well-known ADR processes include negotiation and arbitration.

Given that the mediator is more of a facilitator than a judge, one of the keys to a successful mediation is the impartiality of the mediator. In most cases, impartiality is built into the process from the beginning because the mediator will have been selected by the mutual agreement both parties. Since any sign of favoritism could undermine the legitimacy of the mediator and the effectiveness of the mediation itself, good mediators are careful to ensure there is no perception of bias both before and during the mediation.

Techniques used will vary depending on the mediator’s own past experiences and training, but generally mediators use communication strategies that are designed to elicit information from the parties, keep them focused on settlement and help each side understand the strengths and weaknesses of its own case.

The entire mediation is conducted on a without prejudice basis. This means that nothing a party says during the mediation can be used in proceedings outside the mediation. Everything anyone says is treated as strictly confidential. The without prejudice nature of the mediation helps to facilitate open dialogue between the parties and encourages creative settlement solutions.

In terms of the progression of the mediation itself, the mediator will generally open with a statement outlining the structure of the mediation and will provide a general summary of the dispute. If it has not already been done, the mediator will also ask the parties to sign a mediation agreement.

Next, the mediator will typically go around the table giving each party the opportunity to make a statement. During this time, the mediator will generally ask that no one interrupt the speaker. This ensures that each person has the chance to say what they want while everyone else is listening. Sometimes, just having the opportunity to openly state one’s position to the other side is enough to get parties moving towards settlement.

Once everyone has been heard, the mediator will often summarize the interests and positions of the parties. At this stage, the mediator may also provide the parties with some objective feedback regarding the strengths and weaknesses of the parties’ respective positions in hopes of moving them closer to settlement.

Often the mediator will then split the parties by asking them to go into separate rooms. This process is known as “caucusing.” At this stage the mediator takes on the role of messenger, shuttling information and settlement offers between the rooms. Some mediators will take an aggressive approach during caucusing, offering advice to each party about what they think it will take to settle the case. Others will take a more passive approach, acting merely as conveyors of information.

While mediation may not be as glamorous as court, it has its benefits. Legal fees are often substantially lower if a matter can be settled at an early stage. Much of the stress and anguish which often accompanies lengthy litigation can be avoided through a mediated settlement. In addition, since mediation allows the parties to arrive at a settlement collectively, these settlements are more likely than judge-made orders to be adhered to by the parties and ultimately stand the test of time.

While trials are certainly better fodder for Hollywood and primetime, mediation has become a critical tool for dispute resolution in Ontario.

- Michael D. Heikkinen for abblaw.ca

[The above article is for general informational purposes only and is not legal advice.  If you live in the Ottawa area and would like advice about a legal issue please email us or call 613-569-9500 to speak with one of our lawyers or a member of our staff.]

Wills and Estates 101 Mini-Series Part IV: Did He Die or Did He Separate?

In Ontario there is a family property regime set out in the Family Law Act (FLA) which provides for the equal sharing of property accumulated by married parties during their marriage. Note, this provision does not apply to common-law spouses. What happens if, after the death of one married spouse, it is discovered that the deceased spouse has given all of his or her wealth to someone other than his or her surviving spouse?

Suppose Harold was married to Wendy for 42 years. After his death his last will and testament left most of his estate to his “close friend” Susan. Harold left Wendy $50,000.00. Wendy feels betrayed (especially if her will left everything to Harold). What can Wendy do?

In Ontario the FLA permits the surviving married spouse of the deceased to elect to take either under the will or to make a claim against the estate for an equalization of net family property (NFP) pursuant to Part I of the FLA.

Assuming Harold had a NFP greater than Wendy, Wendy may wish to elect to make a claim for a monetary payment equal to one-half the difference her NFP and Harold’s NFP. For a more thorough discussion of NFP equalization, please click here to read a post by Philip W. Augustine.

When spouses separate, the valuation date is typically the date of separation. This means that the assets and liabilities of each spouse would be calculated based on their value at the date of separation. But, where one of the spouses has died, the FLA deems the valuation date to be the day before the date of death.

The surviving spouse has six months from the date of death to elect to take an equalization payment pursuant to the FLA rather than taking pursuant to the will of the deceased.

An example will illustrate how this election works.

At the date of his death Harold had Net Family Property of $600,000.00

At the date of Harold’s death Wendy had Net Family Property of $300,000.00.

Pursuant to the FLA Wendy is entitled to $150,000.00 calculated as follows: $600,000.00 - $300,000.00= $300,000.00

$300,000.00 /2 = $150,000.00

Pursuant to the will Wendy is entitled to $50,000.00 (see facts above)

Unless Jim’s will had expressly provided that Sally could both make the election under the FLA and take under the will, Sally would be forced to choose only one of the two options.

If forced to choose, it is obviously more beneficial for Wendy to take pursuant to the FLA ($150,000.00) than pursuant to the Will ($50,000.00). Wendy would be well advised to make an election to take pursuant to FLA. Wendy has 6 months to make that election, failing which she shall be deemed to take pursuant to the will.

Should a surviving married spouse feel that he or she has not received a proper division of property upon the death of their spouse they should promptly seek out legal advice so they are in a position to make the necessary election should it be in their interests to do so.

     – Michael D. Heikkinen and Philip W. Augustine for abblaw.ca

[The above article is for general informational purposes only and is not legal advice. If you live in the Ottawa area and would like advice about making an FLA election or would like Augustine Bater Binks to prepare your will, please email us at info@abblaw.ca or call 613-569-9500 to speak to one of our lawyers or a member of our staff.]

Matrimonial Home a Trap for the Unwary: Issue #1

The “matrimonial home” is given special treatment in the Family Law Act and that special treatment can involve huge unfairness to one of the parties to a marriage following marriage breakdown. One way in which this unfairness can arise involves a provision in the Family Law Act (paragraph 4(1)(b)) which defines “net family property” –a fundamental legal concept which is used to equalize property upon the breakdown of a marriage.

When equalizing property accumulated by the parties during the marriage, the parties are each allowed to deduct from the value of their property at date of separation the value of the property which each of them brought into the marriage. However, (and this is where the unfairness comes in) a party is not allowed to deduct the value of the “matrimonial home” if a party owned it at the time of the marriage.

The easiest way to illustrate this issue is by a series of examples.

Example Number 1

Harold has $400,000.00 in cash when he gets married. Wendy has $0.00 at the date of marriage. The parties are married for 10 years and then separate. At the end of the marriage Harold has a net worth of $1,100,000.00 and Wendy has a net worth of $600,000.00. In this case Harold would be entitled to deduct the $400,000.00 he had at the date of marriage. That would reduce his net family property to $700,000.00. Harold would then pay Wendy ($700,000.00 - $600,000.00 = $100,000.00 / 2 = $50,000.00. Harold would then have ($1,100,000.00 - $50,000.00 =) $1,050,000.00 and Wendy would have ($600,000.00 + $50,000.00 =) $650,000.00. In other words, Harold would end the marriage with $400,000.00 more than Wendy and Harold and Wendy would both have shared equally in the wealth accumulated during the marriage. The parties would be in exactly the same relative property position property at the end of the marriage as when they started the marriage (i.e. Harold would have $400,000.00 more than Wendy). That is considered fair by most people.

Example Number 2

Now consider the same facts as in Example number 1, except, the day before getting married Harold purchased 123 Elm Street so that the happy couple would have a nice home to which to return after their honeymoon. The parties live in the home for 10 years and Harold still owns the same home at the date of separation. In this case Harold is not entitled to deduct the value of the home from his Net Family Property. The math in this example would be as follows:

     Harold $1,100,000.00 - $0.00 = $1,100,000.00

     Wendy $600,000.00 - $0.00 = $ 600,000.00

     Harold pays Wendy ($1,100,000.00 - $600,000.00 =)

     $500,000.00 / 2 = $250,000.00

     Wendy and Harold both end up with $850,000.00.

In example number 2 Harold lost half of the $400,000.00 which he brought into the marriage because he purchased a home prior to the wedding day and owned that home at the date of separation. Had Harold waited until after the wedding to purchase the home and brought cash into the marriage he would have been entitled to keep all of the $400,000.00 following marriage breakdown. Most people consider this result to be unfair.

As couples marry later in life or marry for a second time it is increasingly likely that one party to the marriage will bring a home into the marriage in which the parties will reside until the breakdown of the marriage. The treatment of the matrimonial home on separation has many traps for the unwary. More to follow.

— Philip W. Augustine for abblaw.ca