Using the Separation Agreement to Protect Your Estate

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BY VALERIE DYE

When parties execute a Separation Agreement their main intention is to outline their rights and obligation as it relates to issues such as division of property, support, child custody and access. A Separation Agreement should be prepared with all contingencies in mind and should include terms that will protect the parties, not only while they are alive, but also after death.  The reason why this becomes necessary is that many couples do not divorce until many years after separation. It is important to note that even after separation an individual is still considered a ‘spouse’ under the Succession Law Reform Act (SLRA) unless a divorce takes place. In that regard, a separated spouse is still a spouse and has certain entitlements in the event that the other spouse dies without leaving a will. Under the SLRA if one party dies without leaving a will the separated spouse will be entitled to a preferential share of the deceased’s estate.  The preferential share is the equivalent of $200,000 which the spouse is entitled to in priority to anyone else. Thus, if the deceased spouse has an estate that is valued at $400,000 the surviving spouse is entitled to at least $200,000 of that estate. The 1990 Cairns v Cairns illustrates what can happen when a Separation Agreement does not adequately address issues related to the Estate. In that case the parties became separated and signed a Separation Agreement releasing each other from further claims. The husband died intestate and, although separated the wife successfully claimed her preferential share in his estate. The court found that although the parties executed a Separation Agreement which stated that they had released each other from further claims with regard to division of property, the Agreement did not specifically state that they had released their rights to claim under each other’s estate.  As discussed in that case it may not even be enough to mention that parties release each other from claims against the estate. Specific releases must also be made for claims upon intestacy.

It is therefore clear that, while the Separation Agreement is designed mainly to deal with issues that affect spouses while they are alive, failure to deal with estate matters may lead to unfavourable consequences if either spouse dies before a divorce is granted.  It is not uncommon for spouses to execute a Separation Agreement and remain legally married for many years afterwards.

With this in mind a Separation Agreement should always explicitly state that the parties release each other from any claims, rights or entitlement to the other party’s estate whether through testate of intestate succession. The Separation Agreement should also release parties from acting as executors or personal representatives in the deceased spouse’s estate. The Agreement may also state that the deceased’s estate will be distributed as if the surviving party had died first.  Including such provisions in the Separation Agreement will ensure that there will be no unexpected or undesirable outcomes in the event one party dies before a divorce is granted.

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