Toronto Estate Law Blog : Toronto Estate Lawyer : Hull & Hull Law Firm : Trust Mediation and Succession Planning : Serving Ontario, Ottawa, Mississauga, Hamilton

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On August 15, 2011, I blogged on the decision of Hennessy J. in Makarchuk v. Makarchuk, 2011 ONSC 4633 (CanLII).  There, the court found that a separation agreement did not preclude the surviving spouse from benefitting under the deceased’s will.

On Monday this week, the Ontario Court of Appeal dismissed the appeal, and upheld the decision of the lower court.  In a brief endorsement, the Court of Appeal stated “We have not been persuaded that the application judge erred in her interpretation of the Separation Agreement. Since the deceased never revoked his will, the gift in the will to the respondent stands.”

The Court of Appeal also dismissed a motion to admit fresh evidence. No particulars of this motion were given.

As I stated in my prior blog, separated spouses must consider their estate plan, including terms of their wills and beneficiary designations to ensure that their intentions are properly reflected.  In the case of Makarchuk, it is not clear whether the husband intended to benefit his separated spouse.  However, as the lower court noted, had he wished to not do so, there were a number of means available to him to effectively revoke the gift he had made to his spouse prior to their separation.

Have a great weekend.

Paul E. Trudelle - Click here for more information on Paul Trudelle. 

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The effect that separation agreements may have on the entitlements of spouses upon the death of one of the parties has fuelled a great deal of litigation. 

One of the issues that can arise is the effect that the separation agreement has on the last will and testament of the deceased spouse. While the Succession Law Reform Act provides that a bequest in a will to a former spouse is revoked upon the termination of a marriage by judgment absolute of divorce, that is not the case where there is only a separation.

In Makarchuk v. Makarchuk, 2011 ONSC 4633 (CanLII), the parties separated, and entered into a separation agreement. The separation agreement provided that, subject to any additional gifts made in any will validly made after the date of the agreement, the parties released all rights that they may acquire under the laws of any jurisdiction in the estate of the other.

The husband died, without making a new will, and without revoking a prior will which provided that his entire estate was to pass to his now separated spouse.

The court was asked to interpret and apply the separation agreement so as to exclude any benefit to the surviving spouse. The court refused to do so. The court held, applying Eccleston Estate v. Eccleston, 3 R.F.L. (5^th) 54, that the language of the separation agreement was not broad enough to apply to rights acquired under the will.  The release in the separation agreement applied only to statutory rights. The release did not “trump” the will.

It is important for separating spouses to consider bequests made in prior wills, and consider revising their estate plan.

Thank you for reading.

Paul E. Trudelle - Click here for more information on Paul Trudelle. 

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Yesterday, I set out the fact situation in Turner v. DiDonato (2009), 95 O.R. (3d) 147 (Ont. C.A.).

The trial judge decided that Dilia was entitled to the difference between the insurance proceeds that she received and the $100,000 insurance policy that was supposed to be in place. The trial decision was upheld on appeal.

The trial judge held that there was a clear breach of the Separation Agreement, and that the remedy was appropriate in order to put Dilia in the position that she would have been in had the contract been performed.

The Court of Appeal did not agree that the trial judge did not give properly interpret the Separation Agreement. In particular, it did not agree that the clause allowing Dilia to have a first charge against the estate for in the event that Albert died without insurance provided Dilia with the appropriate remedy. This clause, the Court of Appeal held, did not apply because Albert did, in fact, have insurance – it was simply insufficient. 

The Court of Appeal also dismissed the suggestion that the insurance policy was simply security for the support payments. Firstly, the Separation Agreement did not express that it was security. Secondly, the Separation Agreement did not allow Albert to reduce the amount of insurance as the support obligations diminished. Thirdly, it was held that allowing Dilia less under the Separation Agreement as a result of its breach by Albert than Dilia would have received but for the breach was “counterintuitive”. Fourthly, the estate’s suggestion that it would have a claim against Dilia for any insurance proceeds in excess of the support obligations was “at odds” with the stated intention of the parties in the Separation Agreement to fully settle their rights and obligations.

The Court of Appeal agreed that Dilia’s admission that her understanding was that the insurance policy was security for the support payments was not relevant. The Separation Agreement was unambiguous, and contained an “entire agreement” clause, and extrinsic evidence was irrelevant. Further, as such, corroboration under s. 13 of the Evidence Act was not required, as the decision was based on the interpretation of the agreement, and not the evidence of Dilia. Finally, the Court of Appeal dismissed the suggestion that Dilia received a windfall: it held that Dilia received simply what she was to receive under the Separation Agreement.

Did you concur or are you in dissent?

Paul Trudelle

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Today I will set out a fact situation and let you determine the outcome. Tomorrow I will let you know how the trial judge and Court of Appeal decided the matter.

(As observed by a judge in Newmarket recently, being appointed a judge is like going to heaven – all lawyers want to go there, but just not yet.)

The Facts:

Albert and Dilia separated. They entered into a Separation Agreement whereby Albert was to pay spousal support to Dilia until she turned 65. He was also required to maintain a policy of life insurance benefitting Dilia in the amount of $100,000 until Dilia turned 65. The policy also provided that in the event that Albert died without insurance in effect, then his support obligations would be a first charge on the estate.

Albert died before Dilia turned 65. At the time of his death, he didn’t have the required life insurance. Dilia only received insurance proceeds of $43,507.15. She then sued Albert’s estate and his second wife, claiming the difference between the $100,000 that she was to receive under the Separation Agreement, and the amount that she in fact received.

Albert’s estate and second spouse argued that the policy of insurance was only security for the spousal support that Dilia was to receive, and that the insurance proceeds that Dilia received were in excess of her support entitlement. (It was an agreed fact that the support obligations until the age of 65 were less than the insurance proceeds received.) They argued that an award of $100,000 would be a windfall to Dilia.

What did the Court (and Court of Appeal) do? Tune in tomorrow.

(For those who can’t wait, see Turner v. DiDonato (2009), 95 O.R. (3d) 147 (Ont. C.A.).)

Paul Trudelle

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Listen to "Estate Planning Issues for Separated Couples"

Read the transcribed version of "Estate Planning Issues for Separated Couples"

During Hull on Estate and Succession Planning Podcast #56, Ian and Suzana discuss the circumstances surrounding separated couples, remarriage and common law separations.

They discuss the impact that these separations have on estate planning including financial, tax and property ownership considerations.