Where there's a will, there's a way?
Avoiding claims against your estate

In Alberta, you may not have the final say about your estate even if you have a proper will. That is because in Alberta, there is a legal duty to care for your dependants. If you have not adequately provided for the proper maintenance and support of your dependants, a court may award them a larger share of your estate so as to maintain them for their lifetimes.

Did you know that a prenuptial agreement may not protect your estate from claims made by your dependants? The same applies to a separation agreement, release, or waiver. However, the courts do take these into consideration when claims are made against an estate.

Many people are also not aware that if you die without a will, your estate will be distributed in accordance with the Intestate Succession Act. This Act stipulates how your estate will be allocated among your dependants including how much to whom, in order of priority, starting with your spouse. For example, if you have a spouse, your spouse is entitled to the full estate. If you have a spouse and a child, your spouse is awarded the first $40,000 plus 50 percent of the remainder of the estate, and your child would get the other 50 percent.

Proper planning and informed decision-making can ensure your will is honoured and minimize the risk of claims against your estate. We have provided a few common scenarios and related estate rules to help you identify potential issues and make more informed decisions.

In the following scenarios, dependants are defined to be one or more of the following:

•	A spouse (which may include a separated spouse) or common law partner
•	A child under the age of 18 years at the time of your death
•	A child who is 18 years of age or over at the time of your death and unable by reason of mental or physical disability to earn a livelihood.

Currently married with children and own a business

Bob was an entrepreneur who owned his own heavy equipment sales and service business. Bob married Sharon and they raised three daughters and one son, Bob Jr. Their three daughters went off to university and Bob Jr. stayed behind to manage the family business. By the time Bob died at age 68, his estate was worth $3 million.

It was always Bob's intention that Bob Jr. would inherit the family business. Accordingly, in his will, he left $200,000 to each of his daughters, his investment portfolio worth $500,000 to Sharon, and the shares in the business (worth $1.9 million) to Bob Jr. Bob believed that $500,000 would be sufficient for Sharon to buy a house and to pay for her expenses for the remainder of her life.

Despite Bob's good intentions, Sharon was successful in bringing an action against the estate claiming that Bob's will did not provide an adequate amount to support her for the rest of her life. She was awarded an additional $1 million from the estate. After the payment to the daughters and the additional payout to Sharon, there was not enough equity in the business to enable Bob Jr. to continue operating it as a viable venture. Consequently, Bob Jr. had to sell the business.

Bob could have provided adequately for Sharon while at the same time ensuring that Bob Jr. would have sufficient resources to continue viably operating the family business had he considered these options:

•	Creating a spousal trust which provides that the income be paid to Sharon during her lifetime. Upon her death, the remainder of the trust assets could be provided to Bob Jr.
•	Purchasing life insurance naming Sharon as the beneficiary thus alleviating her financial difficulties and reducing the likelihood she would bring an action for a larger share of the estate.
•	Undertaking succession planning for his business. Since Bob's ultimate goal is to ensure his dependants are properly provided for while also ensuring the longevity of his company, he would need expert legal advice on strategies that would address both his corporate succession planning and estate planning issues.

Separated but not officially divorced from spouse

Unresolved matrimonial issues leave your estate vulnerable to claims by your separated spouse. If you separate from your spouse but do not divorce, or if you divorce but leave matrimonial property issues unresolved, your separated or divorced spouse may sue your estate for a larger portion after you die.

For example, Lorne and Holly separated but did not divorce. Because there were no children involved and the split was amicable, they divided their property without involving a lawyer. While married, they accumulated an estate worth $600,000, including the house worth $300,000 and RRSPs worth $150,000. Lorne bought out Holly's interest in the house and retained $100,000 in RRSPs, a savings account, and the camper trailer. Holly retained only $50,000 in RRSPs and a small portion of their savings.

Even if Holly agreed to the asset split at the time of the separation, she can -- within a certain period of time and depending on the circumstances -- bring a matrimonial and a dependant's claim concurrently against Lorne's estate if she feels she has not been adequately provided for.

A matrimonial claim can be made if there is evidence of a marriage breakdown such as:

•	A divorce judgment
•	A declaration that the marriage is null
•	An order of judicial separation
•	Proof that the spouses have been living apart for more than one year, or less if there is no prospect of reconciliation
•	The spouses are living apart and one spouse intends to or is dissipating property.

If Lorne also had a dependant child or an adult interdependent partner, they could claim against his estate but their claims would be subject to the outcome of the matrimonial claim, i.e. the amount remaining after the matrimonial claim is settled.

Some options available to protect your estate against claims made by a separated spouse include:

•	Have a new will drawn once you're separated from your spouse as your existing will is not revoked upon separation or divorce.
•	Obtain independent legal advice on any separation agreement. Ideally, have a lawyer involved upfront to ensure that the agreement is as effective as possible.
•	Ensure you finalize legal and property matters surrounding your separation and divorce. Unresolved matters may leave the door open for a claim against your estate by the separated or divorced spouse regarding the division of property, alimony and/or child support.

Currently living in an adult interdependent relationship (includes common-law), but have children from a previous marriage

Peter and Mary were married for 30 years and had three children together. When they divorced, Peter changed his will, leaving his estate to be split equally among his three adult children. Shortly after the divorce, Peter began dating Joan and soon she moved in with him. Peter provided the home and paid all the expenses and Joan cooked and maintained the home. Peter and Joan lived together for seven years when Peter died unexpectedly. His estate was valued at $600,000.

Joan, his Adult Interdependent Partner, made a claim against Peter's estate and was successful in having his entire estate awarded to her, contrary to Peter's wishes in his will. Six months later, Joan died and left her entire estate to her sister. Peter's children received nothing.

In Alberta, Adult Interdependent Partners are people who share one another's lives, are emotionally committed to one another, and function as an economic and domestic unit. This includes same-sex and non-conjugal relationships. If they have lived in a relationship of interdependence continuously with one another for at least three years or of some permanence, or if there is a child of the relationship, they may be considered to be Adult Interdependent Partners.

Peter's options to ensure his children would ultimately benefit from his estate include:

•	Creating an adult interdependent partner trust which provides that all the income be paid to Joan for the rest of her life with the remainder of the trust assets to be divided amongst Peter's children upon her death.
•	Purchasing life insurance naming Joan as the beneficiary. Providing for Joan through an insurance policy will alleviate her financial difficulties and reduce the likelihood she will bring an action for a larger share of the estate.
•	Purchasing life insurance naming his three children as equal beneficiaries. Upon Peter's death, the insurance money is paid directly to his children and does not pass through his estate and is not available to Joan or others claiming against the estate.

Divorced with children, one of whom is unable to earn a livelihood

Allan and Joy were married and had two children together, Jeff and Daniel. Daniel was mentally challenged and was a "high needs" child. After 10 years of marriage, Allan and Joy divorced. While he maintained a series of relationships over the next 20 years, Allan remained a bachelor until his death.

In his will, Allan divided his estate equally between his two sons who were now adults. Daniel's mother, Joy, acting as representative for Daniel, was successful in bringing a claim for a larger share of the estate based on the fact that Daniel was unable to earn a livelihood due to his disability. As a result, Daniel inherited Allan's entire estate. Five years later, Daniel died without a will. Under Alberta's Intestate Succession Act, his entire estate was awarded to his mother given that Daniel had no spouse or children. Jeff received nothing as a sibling.

Some options available to Allan to ensure both his sons were provided for include:

•	Creating a trust for Daniel which provides that the income or capital can be used for his maintenance, education and benefit. Upon Daniel's death, the remainder of the trust assets are gifted to Jeff.
•	Purchasing a life insurance trust for Daniel. Providing for him through an insurance policy alleviates his financial difficulties thereby reducing the likelihood he will make a claim for a larger share of the estate.
•	Purchasing a life insurance policy naming Jeff as the beneficiary. Upon Allan's death, the insurance money will be paid directly to Jeff without passing through Allan's estate thereby not being available for a claim by Daniel.

In summary, when planning for your personal succession or the succession of your business, you should consider consulting an estate planning lawyer to discuss strategies for creating a will which will minimize the risk of claims made against your estate by dependants and best protect and provide for your loved ones. Each person's situation is unique and the issues can be quite complex, but proper planning and informed decision-making can help ensure that your estate is distributed in accordance with your wishes.

Borden Ladner Gervais LLP is among Canada’s most respected full-service national law firms. With more than 700 lawyers, intellectual property agents and other professionals in six offices across the country, BLG provides corporate legal services to a wide range of clients nationally and internationally in virtually every area of law. For more information, visit www.blgcanada.com.

This e-newsletter is not intended to be a complete statement of the law or an opinion on the subject. Although we endeavour to ensure its accuracy, no one should act upon it without a thorough examination of the law after the facts of a specific situation are considered. No part of this publication may be reproduced without prior written permission of Borden Ladner Gervais LLP.