“Who gets what” when there is no will can be very different from what you expect.
Key issues.
When assessing an intestacy to determine who gets what, the key things to address are:
- What assets are actually ‘in’ the estate?
- Are any assets outside the estate impressed with a trust?
- Did the deceased make adequate provision for financial dependents, and if not, what assets in or outside the estate are affected?
- For the estate itself –
- Was the deceased legally married?
- Who are the closest surviving next-of-kin?
Assets in/out of the estate
Many “assets” pass directly to ‘named beneficiaries’ and do not ‘fall into’ the estate of the deceased. This is especially relevant to TFSAs, RRSPs, RRIFs, and life insurance.
Assets (such as houses and bank accounts) that were owned ‘jointly’ by the deceased and their spouse/partner or a third party (not their adult child) ‘pass outside’ the estate.
Normally, ‘jointly’ owned assets simply become the sole property of the surviving co-owner without probate. The deceased ‘drops off’ title. In the case of real estate, a relatively simple deed can be filed to remove the deceased from a ‘joint tenancy with a right of survivorship’ leaving the survivor the sole owner. With bank accounts.
Assets held in trust
Different rules apply to certain assets which are owned subject to an express or implied trust.
In the case of assets that are co-owned by the deceased and one or more of their financially independent adult children, such as houses or bank accounts, these assets will be impressed with a ‘rebuttable presumption of a resulting trust’. This means that the asset will actually belong to the estate of the deceased and not the surviving child, unless the surviving child can prove (on a balance of probabilities) that their parent wanted to gift the asset to them and exclude other beneficiaries of their estate.
Note: these resulting trust rules generally do NOT apply to assets transferred by beneficiary designation.
Claims by dependents
A “dependent support claim” may be brought by anyone who
- was financially dependent on the deceased, and
- for whom the deceased has not made ‘adequate provision’.
These claims can be made against a wide range of assets including insurance, RRSPs, RRIFs, and jointly-owned houses.
Distribution of the estate
Once it is determined what assets are in the estate, after application of the above considerations, then the distribution of the estate (who inherits what) is fixed by statute (the Succession Law Reform Act, or SLRA).
The SLRA sets out a fixed distribution.
A surviving married spouse will inherit the first $200,000 (common law spouse gets nothing). If there is a surviving married spouse and surviving children, the spouse will receive the first $200,000 and then a share of the remainder with the children.
If there is no surviving married spouse, and at least one surviving child, the estate will be shared among the ‘children’ – with the share of any predeceased child flowing down to the children (if any) of the deceased child.
If there are no surviving spouse or children, but at least one surviving grandchild, the estate will be shared among grandchildren.
If there are no surviving spouse or ‘issue’ of the deceased, the estate will pass to the parents of the deceased if living. If the parents are not living, it will pass to the siblings of the deceased (brothers and sisters). If there is one or more surviving siblings, the share of any predeceased sibling passes to their issue, if any.
Thereafter, the SLRA provides that the estate is to be shared by the surviving next of kin at the closest level of co-sanguinity (i.e. it does not pass to the children of anyone at that level who has pre-deceased).
The SLRA can easily result in a distribution that is very different from what you might expect.
No will & no marriage –> common law spouse gets nothing.
Currently, in Ontario, when there is no will, a common law spouse (i.e. not formally or legally ‘married) has no right to inherit anything from their deceased partner, and, has no right to equalization under The Family Law Act. This applies even if the two common law spouses had children together, and even if the common law spouse is the estate trustee (see above).
Joint accounts when there is no will
You should not assume that the use of ‘joint accounts’ and placing assets like houses ‘in joint tenancy with a right of survivorship’ solves all problems (such as avoiding probate and probate fees). This is only an effective way to dispose of assets if the intent was to make a gift to the other joint owner.
Joint bank accounts with adult children: be careful
With joint bank accounts held by a parent and adult child, the burden of proving that a gift was intended lies on the surviving adult child. If this burden is not met, the asset will belong to the estate of the deceased and must be probated, administered and distributed in accordance with the SLRA. If you intend to make a gift of cash or investments, put it in writing.