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Did These Separated Spouses Intend to Change Title to their Matrimonial Home?

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Did These Separated Spouses Intend to Change Title to their Matrimonial Home?

The question in a recent Ontario case called Hansen Estate v. Hansen was whether the husband and wife had engaged in a “course of dealing” that established that their joint tenancy in the matrimonial home was severed, so that they became tenants-in-common. (And the question of whether the husband’s daughters could inherit his share of the matrimonial home hung in the balance).

The two spouses owned the matrimonial home as joint tenants: this meant that if either of them died, the other would obtain the right to exclusively own the home – a concept known as the “right of survivorship” under the law of joint tenancy.

On the date of the husband’s death, however, he and his wife were legally separated, and were in the process of dividing up their matrimonial assets. His Will, which had been drawn up slightly before his death, provided that his entire estate would be left to his four daughters from a previous marriage.

The problem was that his estate consisting mainly of the matrimonial home, the entirety of which the wife would inherit through her right of survivorship. (In law, the right of survivorship takes precedence over any disposition in a joint tenant’s will).

Two of the daughters went to court to claim that although title to the matrimonial home was jointly held, the conduct by the now-separated husband and wife immediately before his death showed that they intended to sever that joint tenancy and create a tenancy in common instead. This would mean that, under the law relating to that style of title ownership, one-half of the matrimonial home would become part of the estate and available to be distributed under the Will.

The Ontario Court of Appeal agreed with the daughters. It said the “time-honoured test” for determining whether a joint tenancy was intended to be severed was to see whether there was a “course of dealing to intimate that the interests of the parties were mutually treated as constituting a tenancy in common.”

In this case, the conduct the Court cited to support a mutual change to a tenancy in common included:

• The wife moving out of the home and rented accommodation elsewhere,

• The husband taking over payment of the expenses, and his putting the bills in his own name,

• The locks being changed on the home,

• The husband making a new will that named his children (rather than the wife) as beneficiaries (and the matrimonial home was his only significant asset),

• The husband and wife closing their joint bank accounts, and each opening a separate account,

• Both of them retaining their own lawyers,

• Both of them agreeing to exchange financial information to carry out their property division.

The wife had also offered that the husband could “buy out” her interest in the home; the husband did not object to her suggestion that it would otherwise need to be sold.

Here, there admittedly was no explicit agreement between the husband and wife at separation to sever the joint tenancy. However, in light of the course of dealing between the spouses – and taking into account the matrimonial context – there was evidence that this was what they intended.

Therefore, rather than the full ownership going to the wife, the court ruled that one-half of the interest in the matrimonial home was part of the husband’s estate, and available to the daughters as beneficiaries.

What is the lesson to be learned? If separated spouses truly intend to sever their joint tenancy, they may want to enter into an interim agreement to this effect. Alternatively, they may want to change the manner in which they hold title: they can arrange for a registered transfer to themselves, but as tenants in common rather than joint tenants.

Similarly, future spouses who are considering getting married may want to enter into a cohabitation agreement which includes a provision that if the relationship breaks down, title held jointly is automatically severed.

For the full text of the decision, see:

Hansen Estate v. Hansen, 2012 ONCA 112  http://canlii.ca/t/fq6xz

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders. For more information, visit us at www.RussellAlexander.com.

Daughters Named as Beneficiaries, But Widow’s Right to Million-Dollar Insurance Policy Proceeds Determined by Ontario Succession Law

Daughters Named as Beneficiaries, But Widow’s Right to Million-Dollar Insurance Policy Proceeds Determined by Ontario Succession Law

In Matthews v. Matthews Estate, the husband and wife – who had two daughters together – separated in 2006.   The separation and divorce was typical, and included the usual requests for relief including a divorce, child and spousal support, child custody, exclusive possession of the matrimonial home, and equalization of Net Family Property.  Over the next few years, the parties managed to settle and resolve most of these matters, with the exception of spousal support and equalization which still remained to be determined.

However, there were a few little twists in the story.  

The first is not unusual:   at the time of separation, the husband had a $1 million life insurance policy, and had named his two daughters and sister as beneficiaries.  The daughters were to share $900,000 of the policy proceeds upon the husband’s death, with his sister taking the remaining $100,000.

The second twist, however, was that the husband died in the summer of 2010, just after the trial on the remaining matrimonial had begun (in May), but before the judge had written up the reasons for judgment (in August).  It is important to note that just before the husband’s death, the court in the process of sorting out the parties’ matrimonial issues had made an order vesting the life insurance policy in the wife, designating her the sole beneficiary, and making her responsible for paying all the premiums, going forward.

The third twist is that the without the $1 million life insurance policy, the husband’s estate did not have enough money to satisfy the wife’s spousal support needs.    In fact, at the time of the husband’s death, the matrimonial home had not yet been sold, the husband’s estate was insolvent, and the question of spousal support entitlement and an equalization payment to the wife were still unresolved.

As a result – and despite the fact that the deceased husband had named the daughters and his sister as beneficiaries – the entitlement to the proceeds of the policy was still an issue; the wife was asking for these proceeds to be used in order to pay the support that she was entitled to, as a dependent widow under the Succession Law Reform Act.  (That legislation provides that where a deceased has not made adequate provision for the support of his or her dependants (whether by testamentary document or otherwise), the court may order that funds from the deceased’s estate be used for the dependant’s proper support).

As the court put it, after reviewing the history of the litigation and interaction between the various parties:

It soon became clear that the real contest between the parties was centred on the one million dollar insurance policy.  

The court reviewed the interplay between the beneficiaries’ rights under the policy and the law of dependant’s relief.  It concluded that the Succession Law Reform Act makes it clear that the proceeds of the husband’s life insurance policy can be treated as part of the deceased husband’s estate, and can be used to pay support to the dependant wife – notwithstanding the fact that the husband may have irrevocably designated the daughter and sisters as beneficiaries under the policy.   In other words, if the assets of the husband’s estate were insufficient to meet the husband’s obligations to support his wife as a dependant, then the court must look to his other assets – including the life insurance policy proceeds – which pass by right of survivorship or pass outside the will.     Moreover, in such cases the family litigation is converted into a claim under the Succession Law Reform Act.

However, the court added a caution for these kinds of cases:   Given that by virtue of the Act the proceeds of the husband’s life insurance policy (which is not normally part of a deceased’s estate) are nonetheless being brought into the estate, this will naturally affect the beneficiary daughters and sister detrimentally.  As such, care must be taken to ensure that the burden of any support order in favour of the wife is first borne by the traditional assets of the deceased’s husband’s estate, before any encroachment is made upon on the insurance proceeds.

(As a side note, the court also observed that Spousal Support Advisory Guidelines were not an appropriate tool for determining the spousal support obligations of the deceased husband.  Rather, there were to be determined pursuant to s. 62 of the Succession Law Reform Act, which sets out those circumstances that are to be considered in determining the amount and duration of spousal support.)

For the full text of the decision, see:

Matthews v. Matthews Estate (2012), 2012 ONSC 933  http://canlii.ca/t/fq4rd

At Russell Alexander, Family Lawyers our focus is exclusively family law, offering pre-separation legal advice and assisting clients with family related issues including: custody and access, separation agreements, child and spousal support, division of family property, paternity disputes, and enforcement of court orders.  For more information, visit us at  www.RussellAlexander.com.

 

 

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