The Family Relations Act Reform on Estate Litigation
I recently attended a Canadian Bar Association, British Columbia (CBABC) Wills & Estates section meeting, where respected family law practitioner, John-Paul Boyd (JP Boyd) presented a seminar on his take on the highlights of the White Paper on Family Relations Act Reform: Proposals for a new Family Law Act (herein referred to as the “White Paper”), a copy of which can be viewed here.
The White Paper proposes a lot of reforms to the current Family Relations Act, which will significantly change the landscape of family law in BC if implemented as legislation. The word on the street is that the new Family Law Act will be passed as early as July 2011, which will incorporate substantially all of the contents of the White Paper.
For the purpose of this blog post, I will only be focussing on the effect of the White Paper on the realm of estate litigation.
While there are sweeping reforms proposed regarding child support, guardianship and spousal support, I believe that the relevant reforms pertaining to estate litigation concern the change of definition of “spouse”, “family asset” and “excluded property”, as well as the changes surrounding the division of family assets. I will address these changes in turn.
Relevance of the White Paper on Wills Variation Act claims
You may ask why the White Paper or family law in general has any effect or concern for estate litigation. The answer is that the seminal Supreme Court of Canada case of Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807, which can be found here, states that the proper analysis of a Wills Variation Act claim first starts with the analysis of the legal obligations of the testator. Only after those legal obligations have been examined, does the court examine the competing moral claims between the parties.
Only spouses and children of a testator are allowed to apply to vary the will of a testator, and a testator only owes a legal obligation to provide for a spouse, and any minor or dependent children. A testator does not owe a legal duty to provide for any independent, adult children. A testator may owe a moral duty to provide for his/her spouse and children, depending on the circumstances.
The legal obligation that a testator owes his/her spouse is determined by examining the surviving spouse’s entitlement under the relevant family law legislation, on the notional circumstance that the parties separated or divorced just prior to the testator’s death.
Below is what the new Act proposes as the definition of a “spouse”.
1. Definition of “spouse”
A “spouse” is now defined as persons that are:
(a) married;
(b) lived in a marriage-like relationship for a continuous period of at least 2 years; or
(c) lived in a marriage-like relationship of some permanence if the parties are parents to a child or children.
The addition of of (c) to the definition of “spouse” accords common-law spouses with the same rights as married spouses. Under the current law, common-law spouses’ entitlement to family property is determined by the equitable doctrine of unjust enrichment, where a spouse would have to prove what he or she contributed to the other spouse, to their own detriment, to determine his or her share of the family asset. This contribution is often less than 50%. As such, the new Act will likely increase the strength of a claim of a common-law spouse under the Wills Variation Act.
A foreseeable conundrum that may arise with the passing of the new Act is the difference in the definition of “spouse” under theFamily Law Act, and the proposed Wills, Estates, & Succession Act, which is also slated to be passed by the government in the near future, and is meant to be a comprehensive statute governing estate law in BC.
Under the Family Law Act, a person can have more than one spouse at a time. For example, upon a person’s death, the testator could be legally married to one spouse, but have separated from that spouse, and have had any number of common-law relationships of two years or more following the separation, but before his or her death. Indeed, this is the case under the currentFamily Relations Act and Wills Variation Act. The proposed Wills, Estates, & Succession Act’s definition of “spouse”, however, attempts to limit the number of spouses able to claim relief for varying a will to one spouse only by limiting the definition of a spouse to the following, under s. 2 of the Act:
(1) Unless subsection (2) applies, 2 persons are spouses of each other for the purposes of this Act if they were both alive immediately before a relevant time and
(a) they were married to each other, or
(b) they had lived with each other in a marriage-like relationship, including a marriage-like relationship between persons of the same gender, for at least 2 years.
(2) Two persons cease being spouses of each other for the purposes of this Act if,
(a) in the case of a marriage,
(i) they live separate and apart for at least 2 years with one or both of them having the intention, formed before or during that time, to live separate and apart permanently, or
(ii) an event occurs that causes an interest in family assets, as defined in Part 5 [Matrimonial Property] of the Family Relations Act, to arise, or
(b) in the case of a marriage-like relationship, one or both persons terminate the relationship.
(3) A relevant time for the purposes of subsection (1) is the date of death of one of the persons unless this Act specifies another time as the relevant time.
Because neither of the proposed statutes have been passed yet, it is unclear as to whether either or both of them will be changed to reconcile the differences in definition.
2. Division of Property
The definition of family property is drastically changed under the new Act, because under the current Family Relations Act, a family asset is defined to be any asset that a spouse could claim he or she made a contribution towards, or was used for a family purpose. Under the reformed Family Law Act, the definition of family property is reduced, in that there is a defined category of “excluded property”. The grounds for deviating from a 50-50 division is also set at a higher bar, as you now have to prove that it would be “clearly unfair not to do so”, whereas under s. 65 of the Family Relations Act, you just had to prove that a 50-50 division would be “unfair”. See below for the relevant new provisions:
1. “Family property” is all real or personal property in which at least one spouse has “an interest” at the date of separation [s. 76];
2. “Family property” does not include “excluded property”, which consist of the following: property acquired before the relationship, gifts and inheritances, awards and settlements, and property held in trust for a spouse (unless the spouse has an absolute interest in the property and the power to terminate the trust), with the exception that any increase in value of “excluded property” is considered family property [s. 77];
3. Each spouse is assumed to have a half interest in family property and an equal responsibility for family debt [s. 80];
4. Property and debt may be allocated unequally if an equal allocation would be “clearly unfair,” considering factors including the length of the relationship, a spouse’s contribution to a business, the impact of the relationship on a spouse’s means, the conduct of the spouse changing the value of the property, the incurring of debt without the knowledge of a spouse, and a spouse’s contribution to the career of the other [s. 81]; and
5. “Excluded property” may be divided if it would be “clearly unfair” not to do so, considering the length of the relationship and a spouse’s contribution to the property [s. 82].
I believe that the new changes of the definition to the definition of “family property” have arisen due to the increased number of marital breakdowns. It is a modern-day reality that many people have more than one committed relationship in a lifetime, and the proposed definition of family property provides for a more equitable distribution of assets, accounting for the source of the asset (whether pre-marital or acquired during the marriage, and accounting for gifts, settlements, and inheritances).
In conclusion, this new Family Law Act will likely have long-lasting and unexpected effects on how people value and govern their marital relationships across the entire province. From a social engineering perspective, it will be fascinating to see what will happen in the future, and how the clients coming through my door will be affected from these legislative changes.