With new legislation already in place and additional changes on the horizon, it appears that 2021 is to be the start of many exciting and much needed changes in the area of estates law in Ontario. Included among the new and proposed legislation and regulations are: an increased spousal entitlement on intestacy, a new process for administering small estates, remote witnessing of wills, changes for married and separated spouses, and a new power for the court to validate wills that may otherwise be invalid. The following is a summary of these changes and a discussion of some of the anticipated impact that they will have on estate planning and the administration of estates in Ontario.
1. Spousal Entitlement on Intestacy
An intestacy occurs when a person dies without a will or with a will that does not fully deal with all of their assets. The Succession Law Reform Act, R.S.O. 1990, c. S.26, (“SLRA”) provides a framework for determining how the assets of the deceased are to be distributed in the event of an intestacy, the specifics of which depend on who survived the deceased. Where a deceased has a surviving spouse, but no surviving children or other issue, the spouse is entitled to the entirety of the deceased’s estate. Where a deceased has both a surviving spouse and a surviving child or children (or the issue of a predeceased child), the surviving spouse is entitled to a “preferential share” of the value of the deceased’s estate as well as a share of the value of the estate that exceeds the preferential share, while the child or children have an interest in the balance of the estate. It is important to note that for the purposes of the relevant legislation “spouse” means a married spouse only, which under the current legislation includes married but separated spouses (but see 3(b) “Separated Spouses” below for proposed changes to this). “Common-law spouses” are not entitled to a share of the deceased’s estate under the rules of intestacy.
A recent amendment to the regulations made under the SLRA has increased the value of a surviving spouse’s preferential share from $200,000 to $350,000, where a deceased has died intestate on or after March 1, 2021. For an individual who died prior to March 1, 2021, the value of the surviving spouse’s preferential share remains at $200,000.
Using the new value for the preferential share, let’s look at a simple example to illustrate how the preferential share works. Let’s assume that “A” passed away on March 1, 2021 without a valid will, A is survived by A’s married spouse “B” and one child “C” (and no other issue), and the net value of A’s estate is $1 million. As the surviving spouse, B would be entitled to $350,000 of A’s estate plus one half of the remaining $650,000, for a total of $675,000. The remaining $325,000 would go to C. If the assumptions remained the same except that A had two or more surviving children, B would be entitled to $350,000 of A’s estate plus one third of the remaining $650,000, for a total just shy of $567,000. The remaining two thirds would be divided equally between A’s children.
While we cannot underestimate the importance of having a valid will or wills in place to ensure that your assets are distributed in a manner that is appropriate in your circumstances and in accordance with your wishes, the increase in the value of the preferential share is a welcome and probably overdue change that will be comforting to the surviving spouses of individuals who pass away without a valid will in place.
2. New Process For Administering Small Estates
Over the last number of years, we have seen an increase in the requirement for a Certificate of Appointment of Estate Trustee With a Will (or without a Will) (“Probate”), in order to deal with even very modest estates. The current process for obtaining Probate can be (i) costly and (ii) time consuming, particularly in the busier jurisdictions in the province. This is particularly frustrating for executors trying to deal with modest estates. In the words of the Attorney General of Ontario, “right now, the process to apply to manage an estate in Ontario is the same whether the estate is worth $10,000 or $10,000,000”. Thankfully, effective April 1, 2021, there is new legislation and regulations that are intended to streamline the Probate process for smaller estates, thereby increasing the efficiency of, and accessibility to, the justice system.
The details of this streamlined Probate process include the following:
- A “Small Estate” is defined as an estate with a value up to $150,000.
- A simplified application process for a “Small Estate Certificate” has been introduced as an alternative to the traditional application process for a “Certificate of Appointment of Estate Trustee With a Will” or a “Certificate of Appointment of Estate Trustee Without a Will”.
- The same application form for a Small Estate Certificate is used whether the deceased died testate or intestate (with or without a will).
- The application for a Small Estate Certificate requires less supporting documentation. For example, while the same interested parties require notice of the application, a commissioned affidavit of service is not required. Rather, the applicant simply completes a form indicating that notice has been provided. In addition, the applicant does not need to obtain signed renunciations from individuals who may also have a right to apply for Probate. The applicant instead simply makes a declaration to that effect.
- Where there are minor or incapable beneficiaries, notice of the application is still required to be provided to the Office of the Children’s Lawyer or the Office of the Public Guardian and Trustee.
- The application does not require the express consent of interested parties to the appointment of the applicant as estate trustee. However, the applicant cannot file the application until at least 30 days after they have provided all interested parties with the required notice. This window is intended to allow interested parties to challenge the application, failing which, consent to the appointment of the applicant is inferred.
- Estate trustees will not be required to provide a bond unless there are minor or incapable beneficiaries.
- The estate trustee’s authority to receive and administer the assets of the deceased is limited to the specific assets listed on the Small Estate Certificate. This is in contrast to an Estate Trustee appointed through the traditional process, who is authorized to receive and administer all of the assets of the deceased.
We have previously provided additional details regarding the specific rules that relate to an application for a Small Estate Certificate and the forms required.
While the intention behind these legislative and regulatory changes may be to assist with the administration of estates of individuals with less means, the new process may also prove convenient and of assistance to those administering the estate of more moderately wealthy individuals, who may, because of the nature of their estate planning, have very few assets that pass through their estate. This may be as a result of joint ownership planning, wealth that has accumulated through registered plans, TFSAs and insurance policies (all with beneficiary designations that keep such assets outside of their estate), alter ego and joint partner trusts, and more.
That said, caution should be exercised in evaluating whether the traditional or simplified process is to be used if there is a risk of unknown assets being discovered after the fact. If additional assets are discovered but the estate remains under $150,000, an amendment to the Small Estate Certificate may be sought in order for the estate trustee to deal with the newly discovered assets. If additional assets are discovered that push the value of the estate above the $150,000 mark, the estate trustee will need to apply for a certificate of appointment through the traditional process in order to deal with the newly discovered assets. This risk needs to be weighed against the potential efficiencies and cost-savings of the simplified process. To that end, it should be noted that the rules providing for the Small Estate application are permissive rather than mandatory. An executor of an estate with a value under $150,000 can therefore still proceed with the traditional process if they so choose. This may be a wise choice if they are uncertain as to whether they have a full picture of the deceased’s assets.
While it will take some time to understand the extent of the impact of the new Small Estate process, it certainly brings hope that, as with the recent introduction of electronic filing of probate applications, this new process will help ease the strain on the estates courts and reduce the waiting time for the processing of all probate applications. This would be a very welcome change for all estate practitioners, and executors of estates large and small.
3. Additional Changes May Be on the Horizon
Additional amendments to the SLRA and to the Substitute Decisions Act, 1992 (the “SDA”) have been proposed in Bill 245, Accelerating Access to Justice Act, 2021. If this Bill is passed in its current form, amendments that will impact estates law include the following:
(a) Remote Witnessing of Wills and Powers of Attorney
Proposed provisions to the SLRA and the SDA to permit remote witnessing of the signing of wills and powers of attorney via audio-visual communication technology. Essentially, these provisions would extend on a permanent basis the provisions that were put into place early in the Covid-19 pandemic to permit remote witnessing of wills and powers of attorney, including the requirement that one of the witnesses be a licencee within the meaning of the Law Society Act.
(b) Separated Spouses
Under existing legislation, if an individual passes away and their last will predates a judgment of divorce (or a declaration of an annulment), the provisions in their will that relate to the former spouse are revoked and the will is construed as if their former spouse had predeceased them, unless the will indicates a contrary intention. As an example, if the last will of a deceased includes a gift of the residue of the deceased’s estate to their spouse with an alternate gift of the residue to their children if their spouse is predeceased, the gift to the spouse, if such spouse was the former spouse of the deceased at the time of death, would be revoked and the residue would go to the deceased’s children. This is not, however, the case if the married spouses are separated but not divorced (or the marriage annulled). In that case, the gifts in the deceased’s will to their spouse (who they are now separated from) would stand. The proposed amendments to the SLRA, would extend the construction of the will that is used where spouses are divorced to situations where married spouses are separated but not divorced. The proposed amendments include a provision defining when a spouse is considered to be separated from their deceased spouse.
In addition, the proposed amendments to the SLRA would remove the current entitlement of a surviving spouse under the intestacy rules (as discussed above under “Spousal Entitlement on Intestacy”), if the relationship between the surviving spouse and the deceased satisfied the definition of separated spouses at the time of the deceased’s death.
These proposed amendments relating to married but separated spouses would be a welcome change to many as they are likely to be viewed as facilitating an estate distribution that more accurately reflects the intentions of most deceased individuals. However, they do introduce a challenge with respect to the factual determination of whether or not spouses are considered to be separated for the purposes of the legislation. While there will be situations that will be clear, there are also likely to be many situations that are not as clear. Unfortunately, this may increase the risk of conflict amongst potential beneficiaries and could result in costly litigation. If these proposed amendments become law, there is no doubt that the jurisprudence in this regard will clarify the interpretation of this legislative provision for estate planners, who will then be able to minimize this risk by discussing these issues with clients and prepare estate planning documents that take into account and address such legislative changes and the relevant case law.
(c) Wills May No Longer be Automatically Revoked by Marriage
When a person gets married, their will is automatically revoked pursuant to existing provisions of the SLRA (subject to certain exceptions). In the ordinary course, this automatic revocation is useful because individuals often do not get around to updating their will immediately after getting married. Should that remain the case when they die, their last will (which predates the marriage) may not provide for their spouse and may instead only benefit children, parents, siblings, etc. The automatic revocation of that will provides protection to the surviving spouse, as the deceased would be considered to have died without a will and the surviving spouse would therefore be entitled to a share of the deceased’s estate pursuant to the rules of intestacy, as described above. While this is usually an appropriate result, it can also be relied on by unscrupulous individuals preying on those who are vulnerable. While, this does not typically occur, the cases and stories of predatory marriage can be devastating and do warrant protection.
Bill 245 proposes the repeal of the provisions of the SLRA that provide for the automatic revocation of a will on marriage and, if passed, would create an additional level of protection for vulnerable individuals and their estates. However, while beneficial to such individuals and their families, the repeal would also have an impact on estate planning more generally and likely on the standard provisions that drafting solicitors include in the wills that they prepare. It would certainly make it even more important for individuals to update (or at least revoke) their existing wills if they are getting married and if their existing wills were not executed in contemplation of marriage and do not provide for their future spouse.
(d) Enacting a Power for the Court to Validate a “Will” that is Not Otherwise Valid
Last, but possibly most significant, the proposed legislation authorizes the court to order that a document or writing is valid as a will even if it does not satisfy the execution or other requirements set out in the SLRA, so long as the court is satisfied that the document or writing sets out the testamentary intentions of the deceased or an intention of the deceased to revoke, alter or revive an existing will.
This is a marked departure from the existing power of the court, which does not permit the court any discretion in determining whether a “will” satisfies the strict legislative requirements to constitute a valid will. Several provinces have already enacted similar legislation and the Ontario court is likely to look to the decisions of the courts in those provinces when considering the application of this new power, if passed.
It should be noted that the proposed authority of the court is subject to section 31 of the Electronic Commerce Act, 2000, S.O. 2000, c. 17. This Act includes provision for the legal recognition of electronic documents, including contracts, and section 31 explicitly states that the Act does not apply to wills and codicils and trusts created by wills or codicils. In other words, the proposed authority of the court to validate testamentary documents is not intended to allow the court to declare a document or writing valid if that document or writing bears an electronic signature. Original signatures will still be required.
As you can see, there are plenty of changes in the legislation relating to wills and estates. Should you have any questions or concerns regarding the impact of these changes or on your own estate planning or on an estate with which you are involved as executor, beneficiary or otherwise, please do not hesitate to reach out to a member of our Trusts, Wills, Estates and Charities group.