Second Marriage Planning Issues - Hull on Estates #238
Listen: Second Marriage Planning Issues
This week on Hull on Estates, Julia Evans and David Smith discuss how to address and minimize future conflict between a second spouse and children from the previous marriage.
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Second Marriage Planning - Hull on Estates- Episode #238
Posted on February 14, 2011 by Hull & Hull LLP
David Smith: Hello and welcome to Hull on Estates. You’re listening to episode #238 on Tuesday, February 8, 2011.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.
Julia Evans: Hi and welcome to another episode of Hull on Estates. I’m Julia Evans.
David Smith: And I’m David Smith.
Julia Evans: If you want to be heard on Hull on Estates, you can participate by leaving us a comment. Email us at hull.lawyers@gmail.com or you can visit our blog at estatelaw.hullandhull.com.
David Smith: Good morning, Julia.
Julia Evans: Good morning, David.
David Smith: So Julia, we were talking about topics and whenever I have the opportunity to podcast with you, we’re always sensitive to the fact that unlike myself who only practices litigation, you had a previous career doing planning work and solicitor’s work as I understand it. And so what we always try to do when we podcast together is give some thought to planning issues. And in particular, you had a specific sort of area you thought we should podcast on today. And what was that?
Julia Evans: Well it’s sort of a hot spot, I think, as a solicitor drawings Wills and that is, where you have second marriages. And so you have an individual coming in to see you with a partner who is not their first partner and they often bring with them children from previous marriages and their own assets held in different ways.
David Smith: And so I guess the challenge there is to make sure that not only are you providing for the children of the first marriage and the spouse, but also addressing and perhaps minimizing the prospect of future conflict which regrettably we so often see in the practice of Estate litigation.
Julia Evans: Absolutely. And in particular, I in practice found that there were two general approaches that one can take. Firstly…well before that, the first recommendation would always be to, in my view, each of the partners should have separate counsel because their interests may not be perfectly harmonious. But that said, I think sort of two approaches would be 1) you know from a probate tax standpoint, to have the partners hold their property jointly, as joint tenants and so on but then perhaps consider entering a contract with independent legal advice, a domestic contract, that will determine their obligations with respect to the ultimate distribution of their Estates.
David Smith: Right. And I guess inevitably that has to do with the differing expectation of whose gonna benefit in the event that one predeceases the other and that’s gonna tie into the fact that they both come into this marriage with different first…different families. And you know, it’s…we’re approaching Valentine’s Day and it’s not a particularly romantic notion but the reality is that if you’re entering into a second marriage, there’s got to be some sort of business-like decisions made in order to ensure that things are arranged in an appropriate way. And again, to repeat myself, the concern has to be to avoid conflict after you’re gone between your second spouse and the children of the first marriage.
Julia Evans: Yes. A second way you can approach that same issue is to have each spouse hold their property individually and then leave their interest in it to the surviving spouse in some kind of trust with the remainder interest flowing over to their children of the first marriage. But…
David Smith: I guess an example of that would be holding the house as tenants in common rather than jointly?
Julia Evans: Yes.
David Smith: Right. Okay. What other things?
Julia Evans: Well lately I’ve run into an issue a couple of times in practice where we have the breakdown of a marriage and a divorce and we have a Separation Agreement in place that requires that each of the partners holds an irrevocable designation of the other partner as a beneficiary of their life insurance. And what we’re dealing with sometimes is that that contractual obligation is breached. And so one of the partners will die and the other one will try to obtain those life insurance proceeds. And especially if the Estate is not large, can find themselves in a bit of a spot if the person who made the promise to keep them as beneficiary of life insurance hasn’t kept that promise.
David Smith: Well that’s right. And I guess there’s two ways you don’t keep that promise. Either you just stop paying the premiums on the policy or you change the designation to benefit someone other than the spouse who is contractually entitled to it. And of course, you know, the other difficulty you run into here is that it could be that there’s a dependent who has a claim against the life insurance proceeds as an asset available under Section 72 of the Succession Law Reform Act and it’s a nice question as to how the obligation under the Separation Agreement dovetails with the fact that that asset may be vulnerable and deemed to be an Estate asset available to dependents other than the spouse to whom there was a contractual obligation to leave that money.
Julia Evans: Yes.
David Smith: And so these are the kind of cases that create a lot of problems for sure. So in the planning context, though, I guess you touched on this earlier. You can have a situation where there’s a domestic contract as part and parcel of the Wills that are made by the new spouses, correct?
Julia Evans: Yes. And it’s important, I think, to get the order of the execution of the contract and the Wills well planned and have sufficient counsel, sufficient numbers of lawyers on the matter, so that each of the partners have their interest, both with respect to their Will planning and their domestic contract interests properly protected.
David Smith: Right. And I guess, you know, the interesting thing about contract law is, you know, it can bind Estates just…it survives and can bind Estates and is a very real concern, especially in cases where there’s a domestic contract. And I suppose there can be reference to the marriage contract in the Will, presumably, right? Or reference to the existence of a marriage contract?
Julia Evans: Yes.
David Smith: Right. Okay. In the limited time we’ve got left, what other things do you think we can consider in terms of the disputes that can arise between spouses on second marriages? I know one interesting case that Rick Bickhram of our office recently blogged on was a situation where there were two common-law spouses, both separately cohabiting with the deceased who asserted claims against the Estate for support. And in that decision, the Court decided that it’s quite possible to have two separate spouses with whom you cohabit, each of whom can have their own support claim, which I thought was interesting.
Julia Evans: That’s very interesting. And I can also imagine that you could have a couple who never formally divorced their first partner and then were living common-law. So you have a married spouse and a common-law spouse. I don’t know how that might play out.
David Smith: Well, you know, that’s an interesting question which we recently had cause to consider in a claim that we asserted on behalf of a woman who had never been divorced from her husband, been married for a lengthy period of time, continued to live in the matrimonial home and asserted a support claim against the Estate. And it’s a very live issue, depending on the facts, but the Court seemed reticent to recognize an entitlement to support if the period of separation is lengthy, regardless of whether or not the parties are still married. So technically you can be in a position where you’re still married to your former spouse and in a common-law relationship with a new spouse. It seems that the Courts generally give preference to the relationship in existence at the time of death. And if there is a lengthy period of separation, even though technically the married spouse could argue and meet the definition of dependent, a Court may well say that we’re not gonna give anything for support in that circumstance. But, of course, they’re all fact-specific cases, as we know.
Julia Evans: Well that’s…it’s certainly a lot of ground to cover.
David Smith: Yeah, absolutely. And so I think what we want to consider, and I think sort of the kind of wrap up commentary and brings us full circle is a lot of these problems can be avoided with good planning.
Julia Evans: Yes, and open family discussion so that you minimize the shock factor when someone dies and leaves a surprising distribution of their Estate or life insurance proceeds and so on.
David Smith: Yeah, I mean, you know…well that’s right, and we always counsel clients that communication is the key. But, of course, it goes without saying that these are very difficult discussions to have. And, you know, it’s understandable although a lot of people will not have discussions with their children for fear of upsetting the marriage. And the reality is that a lot of these issues are left until after death. And it’s gonna depend upon the extent to which appropriate legal counsel is engaged. And as you pointed out, independent legal advice given to each spouse to ensure that the intentions of the testator are protected and are immune from any attack.
Julia Evans: Yes.
David Smith: Alright. So look, it was great talking with you, Julia. And I think that brings us to the end of today’s discussion. Thanks for listening to all of our listeners, and thanks for joining me today, Julia.
Julia Evans: It was a pleasure, David and I look forward to podcasting with you again soon.
David Smith: And we look forward to hearing from our listeners. Again you can send us an email at hull.lawyers@gmail.com. Please visit our blog at estatelaw.hullandhull.com where you’ll find even more information and discussion on today’s practice of Estate law. We do hope that you enjoyed this presentation. I’m David Smith.
Julia Evans: And I’m Julia Evans. Until next week, so long.
This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
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