By: Nicole Garton, Lawyer, Heritage Law & President, Heritage Trust

Tolstoy wrote at the beginning of Anna Karenina: ‘Happy families are all alike; every unhappy family is unhappy in its own way.’ That unhappiness often finds its painful way into a courtroom.

Abella J. in Pecore v. Pecore, 2007 SCC 17 at para 77

Table of Contents

• I. Introduction
• II. The Intersection of Family and Estate Law in BC
• 1. Who is a Spouse?
• 2. Key Provisions of the Family Law Act
• 3. Key Provisions of the Wills, Estates and Succession Act
• III. Common Client Concerns
• 1. The Future Estranged Son/Daughter In-Law
• A. The Issue
• B. The Potential Solutions
• i) Recent Amendments to the Family Law Act
• ii) Family Law Agreements
• iii) Discretionary Trusts
• 2. The Future Casserole Brigade
• A. The Issue
• B. The Potential Solutions
• i) Inter Vivos Joint Partner Trust
• ii) Mutual Wills Agreement
• 3. The Blended Family
• A. The Issue
• B. The Potential Solutions
• i) Family Law Agreements
• ii) Remove Assets from the Estate
• iii) Inter Vivos Alter Ego/Joint Partner Trusts
• iv) Spousal Trust in a Will
• v) Mutual Wills Agreement
• 4. The Unhappy Later Life Spouse
• A. The Issue
• B. The Potential Solutions
• i) Remain in the Common Law/Legal Marriage
• ii) Register a Land Spouse Protection Act Charge
• iii) Initiate a Separation
• IV. Conclusion

I. Introduction

For many estate planning clients, family law issues will intersect with wills and estates issues. The “3 D’s” of death, disability and divorce are inter-related. Accordingly, estate planning lawyers should be well versed not only in estate law but also family law to be able to fully advise their clients, particularly if those clients are in later life relationships.

II. The Intersection of Family and Estate Law in BC

1. Who is a Spouse?

The Family Law Act, S.B.C. 2011, c. 25 (the “FLA”) and the Wills, Estates and Succession Act, S.B.C. 2009, c. 13 (“WESA”) both define a spouse as married and unmarried partners who have lived together in a marriage-like relationship for at least two years.

As observed by Justice Kent in Connor Estate, 2017 BCSC 978 at para. 53, “like human beings themselves, marriage-like relationships can come in many and various shapes.” The definition of a spouse can include former spouses, same sex spouses and more than one spouse. For example, Justice Kent in Connor Estate held that a relationship was marriage-like, despite the parties having separate residences and one party being legally married to a third party for part of the “marriage-like relationship.”

The FLA in section 3 defines a spouse as follows:

3   (1) A person is a spouse for the purposes of this Act if the person

(a) is married to another person, or

(b) has lived with another person in a marriage-like relationship, and

(i) has done so for a continuous period of at least 2 years, or

(ii) except in Parts 5 [Property Division] and 6 [Pension Division], has a child with the other person.

(2) A spouse includes a former spouse.

(3) A relationship between spouses begins on the earlier of the following:

(a) the date on which they began to live together in a marriage-like relationship;

(b) the date of their marriage.

(4) For the purposes of this Act,

(a) spouses may be separated despite continuing to live in the same residence, and

(b) the court may consider, as evidence of separation,

(i) communication, by one spouse to the other spouse, of an intention to separate permanently, and

(ii) an action, taken by a spouse, that demonstrates the spouse's intention to separate permanently.

WESA in section 2 defines a spouse as follows:

2   (1) Unless subsection (2) applies, 2 persons are spouses of each other for the purposes of this Act if they were both alive immediately before a relevant time and

(a) they were married to each other, or

(b) they had lived with each other in a marriage-like relationship for at least 2 years.

(2) Two persons cease being spouses of each other for the purposes of this Act if,

(a) in the case of a marriage, an event occurs that causes an interest in family property, as defined in Part 5 [Property Division] of the Family Law Act, to arise, or

(b) in the case of a marriage-like relationship, one or both persons terminate the relationship.

(2.1) For the purposes of this Act, spouses are not considered to have separated if, within one year after separation,

(a) they begin to live together again and the primary purpose for doing so is to reconcile, and

(b) they continue to live together for one or more periods, totalling at least 90 days.

(3) A relevant time for the purposes of subsection (1) is the date of death of one of the persons unless this Act specifies another time as the relevant time.

The FLA requires the two years be a continuous period while WESA does not, although WESA does require that the two years be the two years immediately preceding the deceased’s death. The relationship begins on the earlier of the date of the marriage and the date the parties began living together in a marriage-like relationship.

Under the FLA, section 3 provides that spouses can be separated despite continuing to live in the same residence but otherwise does not specify what constitutes a separation. The court may consider as evidence of separation communication by one spouse to the other spouse of an intention to separate permanently and an action taken by a spouse that demonstrates the intention to separate permanently.

Section 2(2) of WESA addresses separation in the estates context. For married spouses, separation occurs when an interest in property arises under the FLA (on separation). For spouses in a marriage-like relationship, two persons cease being spouses when one or both parties terminates the relationship. As separation revokes rights as spouses under WESA, there is a large amount of case law on whether there had been a termination of the relationship prior to death. This is a determination that requires the court to consider both the expressed and implied intentions of each spouse and any available objective evidence. The courts have interpreted this section broadly. The Court of Appeal affirmed in Robledano v. Queano that “whether a relationship is “marriage-like” is a question of mixed fact and law that requires a “broad” or “holistic” approach …. The same can be said of the question of whether a spouse has terminated a marriage-like relationship.”

Parties may also reconcile and will not be considered separated under WESA if, within one year of separation, they begin to live together again with reconciliation as the primary purpose and they do so for one or more periods totaling at least 90 days. If a spouse is named as a beneficiary in a will prior to separation, the gift will be revoked on separation unless there is a contrary intention, or a new will is created post-separation.

2. Key Provisions of the Family Law Act

Full Multi - Family Law Act

Assented to November 24, 2011

www.bclaws.gov.bc.ca

Estate practitioners should be familiar with the provisions in the FLA setting out the division of property and debt upon spouses separating. For example, if a client is not happy with their spouse’s estate plan, what assets they may receive under the FLA upon separation will be an important strategic consideration. Further, wills varation claims are informed partly by what assets a spouse may have been entitled to under the FLA, had the parties separated prior to the death.

Section 81 of the FLA provides regarding the division of family property as follows:

81  Subject to an agreement or order that provides otherwise and except as set out in this Part and Part 6 [Pension Division]

(a) spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution, and

(b) on separation, each spouse has a right to an undivided half interest in all family property as a tenant in common, and is equally responsible for family debt.

Family property is defined generally in section 84 as all property owned by at least one spouse or in which one spouse has a beneficial interest. This includes corporate shares, investment and bank accounts, trust property and any increase in value of excluded property during the relationship. Family debt is defined as debt incurred during the relationship and debt acquired after separation if incurred to maintain family property.

Excluded property is described in section 85, which excludes from family property, among other assets, property acquired by a spouse before the relationship began, inheritances to a spouse, third party gifts to a spouse, a spouse’s interest in a discretionary trust and property derived from excluded property. Section 85(2) provides that the onus of proof is on the party seeking to demonstrate that the property is excluded property.

The date of separation is key in determining which assets are family property and which debts are family debt. However, valuation of property for asset division purposes is not at the separation date but rather at the date an agreement dividing property is signed or the date of trial, unless the parties agree otherwise (section 87).

There are exceptions to the general rule that family property and debt are shared equally. Section 92 permits spouses to enter into agreements regarding the division of property or debt that sets out a different division (or no division of property and debt). Both the presumptive equal distribution of family property, and the presumptive non-distribution of excluded property, can be varied at trial where a judge concludes that it would otherwise be “significantly unfair”: s. 95 in the case of unequal division of family property, and s. 96(b) in the case of division of excluded property. Establishing significant unfairness is a high bar: Banh v. Chrysler, 2022 BCCA 74 at para. 27, leave to appeal to SCC ref’d 40156 (12 January 2023).The test for “significant unfairness” has been defined by Mr. Justice Harris in Jaszczewska v. Kostanski, 2016 BCCA 286 as “something objectively unjust, unreasonable or unfair in an important or substantial sense.”

Section 198 of the FLA sets out the limitation periods for property (and spousal support) claims. For married spouses, the action must be commenced within two years of an order of divorce or annulment. For spouses in a marriage-like relationship, the two-year limitation period runs from the date of separation. In property division claims under the FLA, the death of one spouse does not terminate the surviving spouse’s claim if the claim is commenced within the limitation period. An application to set aside an agreement must be commenced no later than two years after the spouse first discovered, or reasonably ought to have discovered, the grounds for making the application. The limitation periods in s. 198 are suspended during the period that either spouse is engaged in “family dispute resolution” with a “family dispute resolution professional.”

3. Key Provisions of the Wills, Estates and Succession Act

Wills, Estates and Succession Act

Assented to October 29, 2009

www.bclaws.gov.bc.ca

WESA contains a number of provisions that overlap with the FLA.

Part 3 of WESA governs where a person dies without a will in place. If the deceased died leaving only a surviving spouse and no children, the spouse is entitled to the entire estate. If the deceased died leaving a spouse and a child or children, the spouse receives:

• the “household furnishings” which are defined as “personal property usually associated with the enjoyment by the spouses of the spousal home”;
• a preferential share of the estate (being $300,000 if all children are the children of both spouses, or $150,000 if not); and
• one-half of the residue (after payment of the preferential share).

If there are two or more spouses of the deceased, they must agree on how to share the spousal share or the court may make an order regarding division.

The surviving spouse is also entitled to acquire the spousal home from the personal representative, provided they meet the requirements set out in Division 2 of Part 3. Specifically, the right must be exercised within 180 days from the date the estate grant is issued, during which time the personal representative may not sell the spousal home. The spouse is required to serve a written notice on the personal representative that includes the value the spouse places on the deceased’s interest in the home as at the date of death. Disputes regarding value are governed by section 30, and that section also addresses the requirements where the surviving spouse is also the sole personal representative of the estate.

A surviving spouse may apply to court for certain orders regarding the retention of the spousal home where:

• the surviving spouse resides in the home;
• the estate assets other than the spousal home are not sufficient to satisfy the interests of the deceased’s descendants in the estate; and
• acquiring the spousal home would cause financial hardship to the spouse.

The court can make orders including vesting the deceased’s interest in the spousal home in the surviving spouse, specifying the amount of money the spouse must pay to the descendants towards satisfaction of their interest in the estate, and converting the remaining unpaid interest of the descendants into a registrable charge against title to the surviving spouse’s interest in the home. The occupation costs that the surviving spouse must pay while living in the spousal home pending purchase are set out in section 32 of WESA.

Where there is an intestacy, the surviving spouse has first priority to make an application for a grant of administration. A child of the deceased, with the consent of a majority of the children of the deceased, is second in priority. If there is more than one spouse of the deceased, the spouses may agree on who is to apply or the court may make an order.

If there is a separation prior to the death of a spouse, the surviving spouse’s right to receive or share in the intestate estate of a deceased spouse terminates. Section 56 of WESA provides that gifts to a spouse in a Will or appointments of a spouse in a Will (such as executor) are revoked upon separation, unless there is a contrary intention in the will. If a client wishes to continue to include their ex-spouse as executor or trustee, or to provide a gift to the ex-spouse in their Will, they typically must sign a new Will after separation.

III. Common Client Concerns

1. The Future Estranged Son/Daughter In-Law

A. The Issue

Clients who have built up wealth often voice concerns that those hard-earned assets could end up in the hands of their child’s future estranged spouse via a family law action. Knowledge of applicable family law will allow estate planning lawyers to advise and assist their clients to plan against this risk.

B. The Potential Solutions

2. The Future Casserole Brigade

A. The Issue

It’s not uncommon for an estate planning lawyer to hear a concern from one spouse that, if they die first, the surviving spouse will re-marry and potentially leave jointly built assets to a new spouse instead of to their mutual children.

B. The Potential Solutions

3. The Blended Family

A. The Issue

Blended families, those where at least one of a couple’s children is not a mutual biological or legally adopted child, are at higher risk of estate disputes and accordingly require careful estate planning. How best to provide for a surviving spouse must be balanced against wishes to ensure that capital of the estate of the first spouse to die will transfer to their children from a prior relationship. These competing interests regularly result in wills variation claims by spouses and/or children.

WESA provides in section 60 as follows:

Maintenance from estate

60  Despite any law or enactment to the contrary, if a will-maker dies leaving a will that does not, in the court's opinion, make adequate provision for the proper maintenance and support of the will-maker's spouse or children, the court may, in a proceeding by or on behalf of the spouse or children, order that the provision that it thinks adequate, just and equitable in the circumstances be made out of the will-maker's estate for the spouse or children.

The effect is that if a will‐maker leaves all or a significant portion of their estate to their second (or third or fourth!) spouse, their children from an earlier relationship have legal standing to challenge the disposition provided in their will. Similarly, if a will‐maker leaves all of their estate to their children, their surviving spouse has standing to challenge their will. The Courts consider will‐makers to have a moral obligation to provide for spouses and children, even adult, independent children, and failure to provide adequately for any one of them may result in disputes and uncertainty.

Spouses that have separated prior to the death of a spouse lose their standing to apply to vary the will and must proceed under the FLA. “Child” means the biological or adopted child of the will-maker and does not include step-children, unless they were legally adopted.

Assessing what amounts to “adequate” provision for spouse and children will necessitate a fact specific analysis. The leading test in BC is set out in the Supreme Court of Canada’s decision in Tataryn v. Tataryn Estate (“Tataryn”). Despite being decided under the former Wills Variation Act (which was repealed by WESA), the case continues to be applied to variation claims in BC. The court in Tataryn referred to the prior case of Walker v. McDermott (”Walker”) which held that the test for determining what is adequate, just and equitable is that of the “judicious father of a family seeking to discharge both his marital and his parental duty,” and should be determined according to contemporary standards, which will change from time to time. While the test in Walker was confirmed in Tataryn, in Tataryn the Court also stated that the test requires consideration of the legal and moral obligations owed by the deceased to the spouse or child.

Legal obligations to a spouse are framed by what the surviving spouse would have been entitled to had there been a separation immediately prior to death. This brings into the analysis the property and debt division provisions of the FLA, as well as the spousal support provisions. As a parent will not typically have a legal obligation to an adult, self-supporting child, where there are competing interests between a spouse and adult children in a wills variation action, the court must first address the legal obligation to the surviving spouse before addressing competing moral obligations.

Moral obligations were not defined by the Court in Tataryn but appear to include the factors that guided the courts’ discretion in the cases prior to the Tataryn decision. Courts must assess all competing claims to the estate having regard to the fact that not all claimants have claims of equal moral strength and that legal obligations take precedence over moral obligations. Courts may consider the reasons of the will-maker for making a limited gift in the will or disinheriting the spouse or child, provided the reasons are accurate, rational, connected to the disinheritance and not against public policy.

Key considerations of a court will include the following:

• Did the testator make any promises to the applicant?
• What was the nature of the relationship between the testator and the applicant?
• What kind of support did the testator give the applicant throughout their relationship?
• How large is the estate?
• What are the needs of the applicant?
• Did the spouse or child engage in any misconduct?
• How long was the marriage?
• Is the child an independent adult?

B. The Potential Solutions

BC courts have held that a person may arrange their affairs to reduce the possibility of a wills variation claim. There are a variety of tools available to clients to reduce the likelihood of a wills variation act claim or at least reduce the chances it will be successful if it occurs.

4. The Unhappy Later Life Spouse

A. The Issue

Sometimes later life spouses are unhappy in their marriages and are considering a “grey divorce.” On a related note, the unhappiness may primarily lie in a lack of trust regarding finances and a dissatisfaction regarding the other spouse’s estate planning. Advising these clients on how best to proceed will require an understanding of family law and estate law considerations and how they will intersect in that particular client’s circumstances.

B. The Potential Solutions

IV. Conclusion

Competent estate practitioners will have an understanding of how family law intersects with the estate issues facing their clients. While the intersection of these areas of law can be complex, this knowledge will enable estate planners to create agreements and testamentary documents that can effectively address common client concerns. Particularly for clients in later life and with blended families, a clear understanding of how these areas of law interface will better equip us to help clients avoid the stress, costs and delays of disputes in the event of their death, disability and/or divorce.

Nicole Garton is president and co-founder of Heritage Trust.

Recognized by Best Lawyers in Canada for trusts and estates and family law, she previously chaired the Canadian Bar Association Wills and Trusts Subsection (Vancouver).

Contact Nicole by email or phone at (778) 742-5005 x216.

Heritage Trust is a leading non-deposit taking financial institution, regulated by the BC Financial Services Authority (BCFSA), a government agency of the Province of British Columbia. Heritage Trust offers caring and professional executor, trustee, power of attorney, committee, escrow and family office services to BC resident clients.

We welcome you to contact us.