The devil is in the drafting: is an estate entitled to spousal support payments?

The recent Alberta Court of Queen’s Bench decision in Marasse Estate (Re), 2017 ABQB 706 is yet another reminder that drafting legal documents must be done carefully and with a view to their long-term effect. The main issue in this case was whether the surviving ex-spouse was obligated to continue paying spousal support to his deceased ex-spouse’s estate.

Justice Mah found that, based on the wording of the parties’ specific Separation Agreement, the husband was obligated to continue making spousal support payments to the deceased former wife’s estate.

By way of background, as part of their separation, the former spouses entered into a Separation and Property Agreement.  Both were represented by counsel.  Both parties knew that the wife had been ill for several years.  Under the Separation Agreement:

  • The husband agreed to pay monthly spousal support of $3,000 for 5 years;
  • The parties gave up their right to review or vary the entitlement, quantum and duration of spousal support even if there was a material change in circumstances of either party;
  • The husband was required to secure payment of the support through an insurance policy;
  • The agreement contained a relatively standard clause that it was binding upon and would enure to the benefit of the parties’ heirs, executors, administrators, successors and assigns

While the Separation Agreement dealt with the division of property should one spouse predecease the other, it was silent on how the spousal support payments would be treated if the wife died before all of the payments had been made.

The wife died about 8 months after signing the Separation Agreement.  According to its terms, the husband was still responsible for 52 monthly payments, equivalent to $156,000.  The wife’s daughter, who was her personal representative (and presumably a beneficiary), applied to the Court to enforce the Separation Agreement on behalf of her mother’s estate.

The husband sought to vary the agreement.  He argued that with the wife’s death, she no longer had an economic need for support.  The Court disagreed, finding that while contractual spousal support could reflect the theoretical bases of compensatory and non-compensatory spousal support, the parties did not have to adhere to those theoretical objectives when entering into separation agreements.

The husband also argued that spousal support was a personal right, which could not pass to an estate.  However, Justice Mah distinguished cases where spousal support was ordered by the Court, versus those cases where the parties agreed to pay support in a contract.  He considered the enurement clause, the non-reviewability clause and the comprehensive nature of the Separation Agreement to conclude that the Separation Agreement created a juristic reason to continue the support payments.  There was no reason to vary the Separation Agreement under the test set out in Miglin v Miglin as applied in Alberta.  The Court declared that the husband’s obligation continued notwithstanding the wife’s death.

In conclusion, individuals negotiating separation agreements should recognize the potential long-term effects of contractual spousal support payments on their estates.  Carefully consider your intentions and ensure that your separation documents truly and clearly reflect those intentions.

Thank you for reading!

-Predrag

It’s your funeral, but who calls the shots?

If you have a will, you may have spelled out your detailed wishes for your funeral in the document.  Would you be surprised to know that your personal representative does not have to follow them?  You may have also heard that funeral expenses get paid out from an estate in priority to all other expenses.  So, who actually has legal responsibility for arranging and paying for the funeral?  And what should you keep in mind at the outset when the question of funeral arrangements comes up?

 

Who has the legal duty for funeral arrangements?

In Alberta, it is well-settled that the personal representative named in a will has the sole legal responsibility and authority for making funeral arrangements.  That authority is confirmed by the Estate Administration Act, the Funeral Services Act, the Cemeteries Act and their respective regulations.  That means the personal representative does not have to follow funeral instructions in a will, though the vast majority do.

If there is no will or the personal representative is unavailable or refuses to give burial instructions, then the law gives the following people priority: spouse, adult child, parent, guardian, increasingly more distant relatives, with the Minister of Human Services being a decision-maker of last resort.  Where there are two or more individuals of equal rank, the right devolves on the eldest.  The Court has the discretion to vary the order of priority among all of the above categories.

 

Who has to pay for the funeral?

In Chernichan v Chernichan (Estate), 2001 ABQB 913, the Alberta Court of Queen’s Bench confirmed that the deceased’s estate has the primary responsibility to pay for the funeral expenses.

In that case, the deceased’s brother paid for the funeral out of his own pocket.  The personal representative used estate funds to pay out other estate debts before paying the brother back for the funeral expenses, leaving the estate insolvent.  The brother claimed that he should have been paid back in priority to all other creditors, including Canada Revenue Agency.

The Court conducted an in-depth review of the law and concluded that where the estate is insufficient to cover the funeral expenses, a secondary responsibility falls on the person responsible in law for supporting the deceased.  Therefore, a surviving spouse, adult interdependent partner or a parent of a minor child may have to make up the shortfall.  The residual responsibility to pay for the funeral rests with the Minister of Human Services.

In Chernichan, the Court also held that funeral expenses are entitled to a priority over other estate administration expenses and liabilities, except for the expenses of proving a will.  The personal representative, being the deceased’s wife, was ordered to pay the expenses to the brother.

 

What is a reasonable funeral?

The liability of the estate, the personal representative, and the responsible survivors for funeral expenses is limited to reasonable expenses.  There is no universal answer as to what is reasonable.  The analysis will depend on the deceased’s station in life, size of the estate and cultural background.  For example, in Lopushinsky Estate, 2015 ABQB 63, the Court held that a $26,000 funeral was reasonable given the deceased’s highly respected status in his community (the funeral required overflow seating and a video link to the service because of the number of attendees), the fact that he spent a similar amount on his wife’s funeral a year before, and the size of his estate.

 

Things to keep in mind at the start

On the planning side, pre-paid funeral arrangements may decrease family disputes about the type of funeral you want and will make the job easier for your personal representatives.  They also eliminate the risk of there being inadequate assets to pay for the funeral.

Whether you are an executor or a family member who is making funeral arrangements, always consider the reasonableness of the cost of the funeral in light of the deceased’s station in life and expressed wishes before making the final arrangements.

While personally paying the funeral expenses may be a generous gesture, one would be well advised to consider the likelihood that estate assets will be sufficient to reimburse those expenses.  Finally, ensure that your intentions with respect to the payment are documented at the outset – is the payment meant to be a gift or simply a short-term loan to the estate?

Funeral arrangements have the potential to set the tone for the rest of the estate administration.  Taking care to make the right decisions at the start is important and personal representatives and family members should not rush into decisions during the difficult and emotional time immediately following a loved one’s death.

 

Let us know if you have any questions or comments and thank you for reading.

-Predrag

My last will and textament

What would you look for in a document to determine if it was a legally valid will?  An Australian man’s estate recently made headlines when the Queensland Supreme Court admitted an unsent text message into probate as his valid last will.

The deceased created the following text message on his cell phone shortly before he committed suicide:

“Dave Nic you and Jack keep all that I have house and superannuation, put my ashes in the back garden with Trish Julie will take her stuff only she’s ok gone back to her ex AGAIN I’m beaten . A bit of cash behind TV and a bit in the bank Cash card pin 3636

MRN190162Q

10/10/2016

My will”

The message was addressed to the deceased’s brother and purported to leave the estate to him and a nephew.  The deceased was also survived by his wife, though the marriage was apparently tumultuous and short-lived, and an estranged son.  The unsent message was found in the drafts folder.

The judge considered the detail of the deceased’s instructions about the disposition of his assets (like providing the PIN to his bank account, location of cash).  Other evidence, such as the deceased’s strained relationship with his wife and estranged son, contrasted with a close relationship with his brother and nephew, the fact his phone was found next to him and that he concluded the text with the words “My will” further solidified the Court’s analysis that he intended the text message to operate as his will.  You can read the full Court decision here: Re Nichol, Nichol v Nichol [2017] QSC 220.

Could this happen in Alberta?

A simple text message like the one in the Nichol estate would likely not qualify as a valid will in Alberta.  However, like the Queensland law at the centre of that case, Alberta law gives the Court leeway to validate a document that does not comply with all of the requirements for a valid will if there is sufficient evidence to convince the Court the deceased intended the document to act as his or her will.

To start, how do you make a valid will in Alberta?  The Wills and Succession Act requires a will to be:

  • in writing;
  • signed by the testator;
  • in the presence of two witnesses;
  • both of whom are present at the same time; and
  • each of whom signs the will in the testator’s presence.

Alberta law also allows “holographic” wills: wills which are written entirely in the deceased’s handwriting and signed by the deceased, in which case no witnesses are required.

If the deceased doesn’t comply with those requirements, the Court could consider two sections of the Wills and Succession Act to validate the document:

  • section 37: the Court can dispense with the formalities if satisfied on clear and convincing evidence that the writing sets out the testamentary intentions of the testator and was intended by the testator to be his or her will. One thing the Court cannot dispense with under this section is the requirement of a signature.  Therefore, it would be of little help with a text message; or

 

  • section 39: the Court could rectify a document by inserting a signature only if satisfied that the deceased intended to sign the document and give it effect as a will, but failed to do so because of “pure mistake or inadvertence.” This is meant to be used in narrow circumstances, and given the facts in Nichol, likely couldn’t have saved the text message without more – on those facts, the failure to sign was probably not a result of mistake or inadvertence, but a deliberate decision.

These powers are relatively new in Alberta and have not been widely considered by our Courts.  While there are a handful of reported decisions, none have considered the level of departure from the formalities found in Nichol.  However, we will likely see attempts to push the boundaries in the years to come as people change the way they manage and create their legal documents.

Contact us if you are unsure whether you are dealing with a proper will.  Even if it doesn’t have all of the formalities, an Alberta Court may recognize it as a valid testamentary document, which may drastically alter the administration and distribution of an estate.

Thank you for reading,

-Predrag

PS – Our friends at Hull and Hull also recently wrote about this case from an Ontario perspective.