Election of a fixed share

sharing of ma trimoni al prop erty upon death. In our op inion, Tataryn presents on ly a partial solution to the problem and not the best solution. The third option is the preferr ed me thod of reform .

The reform we envisage is for the benefit of the surviving spouse and not for the benefit of the estate of the deceased spouse. Consequently, while the surviving spouse can commence an action against the estate of the deceased spouse, the estate cann ot comm ence an a ction again st the survivin g spouse. T he only

exceptions to this rule occur when an action has been commenced by either spouse during their joint lives. If the deceased spouse commenced the action before his or her death, the estate can continue the action. If the surviving spouse commenced the action before the death of the deceased spouse, the estate can file a statement of defen ce and co unterclaim. F urthermo re, the survivin g spouse s hould no t be able to discontinue the action without the consent of the personal representative of the deceased spouse, or le ave of the court.

Overview of existing Matrimonial Property Act

To und erstand the re comme ndations m ade in the re port, the read er will need to have a basic unde rstanding of the M PA as it now o perates. Therefore, Ch apter 3 contains a b rief summ ary of this area o f the law. T his discussio n will be of value to wills and estates lawyers who do not practice extensively in the area of family law.

It will also be of value to lawyers who have such experience but who are interested in how the MPA operates when the action is commenced after the death of one of the spouses.

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Our recomm endations for chang e to the MPA , which are found in Chapter 4, are summarized as follows. Presently, the surviving spouse can bring a matrimonial property action upon the death of the deceased spouse only when marriage breakdown occurred during the joint lives of the spouses. The MPA should be amended so that marriage breakdown is no longer a precondition to bringing the action. Upon death of a spouse, the surviving spouse should be able to seek division of property acquired over the course of the marriage no matter how

harmonious or inharmonious the relationship. Previous division of the matrimonial property acco rding to a m atrimonial p roperty order o r settlement ag reement w ould be a bar to an action on death unless the couple had reconciled in the interim. The existing limitation period of six months from the grant of probate or letters of adm inist ratio n wo uld a pply.

Subject to c ertain chan ges, division of prope rty on death w ill take place as it now do es. The ge neral law re garding ex empt, distribu table and d ivisible prope rty would remain unchanged as would the court’s ability to deviate from equal sharing in the appropriate circumstances. Also, the law regarding valuation date and the treatment of debts and liabilities would remain unchanged. This means that in most cases the valuation date will be the date of trial and the court will consider all of the property and debts of either spouse as of that date. Our recommendations would bring about change in respect of what is brought into account on death. The MPA should be amende d to ensure that all proper ty that passes ou tside the estate to the surviving spouse is treated as property of the surviving spouse for the purposes of the accounting under the Act. This changes the law as stated in Dunn Estate v. Dunn. In addition, life insurance proceeds paid to the surviving spouse by reason of a policy owned by the deceased spouse will be treated as property of the surviving spouse. Such property will no longer be exempt property. Also, funeral and testamentary expenses will be treated as a debt of the deceased spouse.

In Chapter 5, we examine the interaction between the proposed right to seek division of matrimonial property on death and rights presently available to the surviving spouse on death of the deceased spouse. The latter rights include the right to receive property by way of will or intestacy and rights that arise under the

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entitled to his o r her rights un der the M PA in ad dition to any pro perty that wou ld flow to the surviving sp ouse by wa y of will or intesta cy after satisfactio n of debts of the estate and the matrimonial property order. In an earlier report, we have recommended that the dower life estate be replaced with a right to occupation under Part 2 of the M PA. The right of occupation wo uld exist until varied by court order. The recommendations concerning reform of dower rights fit well with the recommendations made in this report. In the event of an application to vary the occupation right, the court should consider the assets available for the support of the surviving spouse including the matrimonial property entitlement. The proposed matrimonial property rights would also coexist with the rights of the surviving spouse under the Family Relief Act. As is now the case, the m atrimonial p roperty action may be joined with an application for family relief.

Administration of the es tate

Chapter 6 deals with the issues that arise in the administration of an estate faced with a ma trimonial pro perty claim. Pres ently, a combin ation of m atters will determine how beneficiaries are affected by a matrimonial property order: the terms of the matrimonial property order itself; the marshalling rules that govern the order in which assets are used to satisfy debts; the composition of the estate; and the terms of the will. We recommend that this system be replaced. In the absence of direction s in a will, the b urden of the matrim onial prope rty order should fall ratably on all ben eficiaries of th e estate in pro portion to the value of th eir respective interests after payment of all funeral and testamentary expenses, and debts and liabilities.

We also make recommendations governing the priority of payment of claims against the estate. Subject to payment of secured creditors and the federal Crown, the propo sed order is a s follows: (1 ) reasonab le funeral ex penses, (2) re asonable testamentary expenses, (3) all unsecured debts (including debts due to the

provincial C rown) an d liabilities in existe nce at the tim e of death , if any, (4) family relie f ord er, if any an d (5) distr ibut ion o f the esta te un der t he w ill or i ntes tacy.

Maintenance orders would rank equally with a money judgment made in a matrim onial pr operty ord er and o ther un secure d debto rs.

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given to the surviving spouse by virtue of section 7 of the Administration of Estates Act and the tim ing of the d istribution of th e estate. The circumstan ces in which the personal representative must serve the section 7 notice should be broadened to accommodate recommendations we make in respect of assets that pass outside the estate. The personal representative can distribute the estate no earlier than 6 months from the grant of probate or administration. Furthermore, where an action is commenced during this period, the personal representative of the deceased spouse must hold the estate subject to any matrimonial property order that is m ade.

Will Substitutes

Chapter 7 deals w ith the thorny question of will substitutes that pass to third

parties. The term “will substitutes” describes assets that pass outside the estate and includes property held in joint tenancy, property that passes by w ay of beneficiary design ation, donatio mortis causa, inter vivos trusts by which the settlor keeps the benefit and control of the assets until death, and life insurance. Several judicial decisions demonstrate that will substitutes are an effective means to deplete the estate and thereby diminish or defeat any claim that can be brought only against the estate. To ensure that division of matrimonial property on death cannot be easily circumvented, we recommend that for the purposes of calculating the entitlement of the surviving spouse, will substitutes that pass to third parties be treated as pro perty of the de ceased. W e also recom mend tha t certain will

substitutes fa ll into the categ ory of exem pt property. Ex empt prop erty would include any will substitute that is used to satisfy an existing debt or liability of the deceased spouse and any will substitute that serves a legitimate business purpose.

If the estate is insufficient to satisfy the matrimonial property order, the surviving spouse would then be entitled to seek satisfaction of the deficiency from the recipients of the will subs titutes. The rec ipients wo uld have to contribute proportionately to satisfaction of the claim. See Chapter 7 for the actual recommendations and supporting reasoning.

Transition

We recommend that these recommendations apply to:

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(b) all individu als who d ie with a w ill wherein it is ex pressly stated that th e will is made in contemplation of the proposed amendments, and

(c) all individuals who die on or after a certain date, that date being tw o years from the date the amendments come into force.

This would give testators two years to respond to the change in the law.

Conclusion

Tataryn already gives the surviving spouse the ability to seek division of

matrimon ial property und er the umb rella of a fam ily relief application , and wills are presently being drafted with this in mind. This is an awkward way of bringing about divisio n of matrim onial prope rty on death. O ur recomm endations w ould serve the same policy, but do it directly under the MPA, and deal with the

consequential issues that arise in the administration of an estate faced with such a claim.

xvii REC OM ME NDA TIO N No . 1

A surviving spouse should not have to depend upon the generosity of his or her spouse to bring about equitable sharing of matrimonial property upon death of that spouse. . . 7 REC OM ME NDA TIO N No . 2

The Matrimonial Property Act should be amended so that upon death of a spouse, the surviving spouse can seek division of property acquired over the course of the marriage. This cause of action would arise even if the spouses continued to reside together until the death of one of them. . . 26 REC OM ME NDA TIO N No . 3

The scope of the proposed reform will not confer rights on the estate of the deceased spouse. Subject to certain exceptions, the rights created by the Matrimonial Property Act will not survive for the benefit of the estate of the deceased spouse. Where, however, the deceased spouse had commenced an action before his or her death, the estate should be able to continue the action after the death o f the de ceased spouse . . . . 28 REC OM ME NDA TIO N No . 4

Where a matrimonial property action is commenced during the joint lives of the spouses and the defendant dies before filing a statement of defence and

counterclaim,

(i) the personal representative of the deceased spouse should be able to file a statement of defence and counterclaim in the action and defend the action, and

(ii) the surviving spouse may not discontinue the action without the

consent of the personal representative of the deceased spouse or leave of the court. . . . 75 REC OM ME NDA TIO N No . 5

(a) This recommendation applies where the spouses have obtained a matrimonial property order dealing with the division of all of their matrimonial property but have n ot obtain ed a div orce.

(b) If the spouses live separate and apart after the granting of the matrimonial property order, the matrimonial property order should be a bar to any action under the Matrimonial Property Act upon the death of one of the spouses.

(c) If after the granting of the matrimonial property order the spouses resume cohabitation for a period o f more than 90 d ays, with reconciliation as its primary

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of one of the spouses with respect to the property of the same spouses. . . 82 REC OM ME NDA TIO N No . 6

(a) This recommendation applies where the spouses have not divorced but have divided all of their matrimonial property according to the terms of an agreement that complies with sections 37 and 38 of the Matrimonial Property Act.

(b) If the spouses live separate and apart after the execution of the agreement, the agreement would be a bar to any action under the Matrimonial Property Act upon the death of one of the spouses in respect of any property governed by that

agreeme nt.

(c) If after the execution of the agreement the spo uses resume coh abitation for a period of more tha n 90 days, with reconciliation as its primary purpo se, the Court may – in the absence of an agreement to the contrary – make a further matrimonial property order upon the death of one of the spouses with respect to the property of the same spouses. . . 84 REC OM ME NDA TIO N No . 7

A matrimonial property action may not be commenced more than six months after the date of issue of a grant of probate or administration of the estate of the

decea sed spo use. . . . 89 REC OM ME NDA TIO N No . 8

For the purposes of an accounting on death, the full value of property acquired by the surviving spouse on the death of the predeceasing spouse by virtue of:

(i) a right of survivorship;

(ii) a pension plan or other lump sum or periodic payment payable to the surviving sp ouse in his o r her capac ity as survivor of the deceas ed spouse ; (iii) a retirement sa vings plan , retirement inc ome fun d or annu ity payable to the survivin g spouse o n the death of the othe r spouse;

(iv) proceeds that are payable to the surviving spouse under a policy of life insurance on the life of the deceased spouse that is owned by either spouse;

and

(v) proceeds that are payable to the surviving spouse under a policy of life insurance that was taken out on the lives of a group of which the deceased spouse was a m ember;

should be included as property of the surviving spouse. . . 98 REC OM ME NDA TIO N No . 9

For the purposes of an accounting on death, the following property should be included as property of the deceased spouse:

(i) proceeds of a policy of life insurance on the life of the deceased spouse and owned by either spouse which proceeds are payable to the estate;

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was taken out on the lives of a group of which the deceased spouse was a member; and

(iii) any other sum of money payable to the estate by reason of the death of the deceased spouse. . . 99 RECOM MEND ATION No. 10

(a) For the purposes of an accounting on death, the following property will be exempt from distribution:

(i) pr ope rty acq uire d by a spou se by g ift fr om a third part y,

(ii) p rope rty acq uire d by a spou se by i nhe ritan ce fr om a third part y, (iii) property acquired by a spouse before marriage,

(iv) an award or settlement of damages in tort in favour of a spouse, unless the award or settlement is compensation for a loss to both spouses, or (v) the proceeds of an insurance policy paid during the joint lives of the spouses where the policy is not insurance in respect of property, unless the proceeds are compensation for a loss to both spouses.

(b) The exemption will be for the market value of that property at the time of marriage or on the date on which the property was acquired by the spouse,

whichever is later. . . 100 RECOM MEND ATION No. 11

The existing treatment of debts and liabilities in the context of division of

matrimon ial property on d eath is satisfac tory. Where th e valuation date is the da te of trial, the debts and liabilities of the deceased spouse will include funeral and testamentary expenses. . . 102 RECOM MEND ATION No. 12

The jurisprudence governing choice of valuation date is adequate. . . 103 RECOM MEND ATION No. 13

In a division of prope rty upon death , the court sho uld retain its disc retion to

deviate from equ al division where this is justified upon consideration of the fac tors listed in section 8 of the Matrimonial Property Act. . . . 105 RECOM MEND ATION No. 14

Property of the type listed in Recommendation 8 should be governed by section 7(4) of the Matrimonial Property Act. . . . 106 RECOM MEND ATION No. 15

Sections 37 and 38 of the Matrimonial Property Act should co ntinue to ap ply to the division of matrimonial property on death. . . 107

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The right of the surviving spouse to seek division of matrimonial property upon the death of the deceased spouse would not affect the right to make application under the Family Relief Act. An application under the Family Relief Act may be joined with an application under the Matrimonial Property Act. . . 110 RECOM MEND ATION No. 17

As recommended in Report for Discussion No. 14, the dower life estate should be replaced with a right to occupation under Part 2 of the Matrimonial Property Act.

The right to occupation would exist until varied by court order. In the event of such an application, the cou rt should consider the assets av ailable for the support of the surviving spouse, including the matrimonial property entitlement of the surviving spouse. . . 115 RECOM MEND ATION No. 18

The rights of the surviving spouse under the Matrimonial Property Act should be in addition to the rights of the surviving spouse upon the intestacy of the deceased spouse. This means:

(i) The gran ting of a m atrimonial p roperty order sh ould not af fect the rights of th e sur vivi ng sp ouse on in testa cy.

(ii) The court should not co nsider the amount p ayable to a spouse under The Intestate Succession Act in making a distribution o f matrimo nial property pursuant to an application made or continued by a surviving spouse or continued by the personal representative of a deceased spouse where the deceased spouse died intestate. . . 120 RECOM MEND ATION No. 19

The rights of the surviving spouse under the Matrimonial Property Act should be in addition to the rights that the surviving spouse has by reason of the will of the deceased spouse. This means:

(i) the court should distribute the matrimonial property in the same manner as if the parties w ere alive ,

(ii) the person al representa tive should d istribute wh at is left in the esta te after satisfaction of the matrimonial property order and other debts and liabilities according to the terms of the will, and

(iii) quantification of the matrimonial property entitlement should not be influen ced by th e terms of the w ill. . . . 129

(iii) quantification of the matrimonial property entitlement should not be influen ced by th e terms of the w ill. . . . 129