Relationships: Know Your Rights and Obligations

Each province has legislation addressing the rights of married partners and partners in a common-law or same-sex relationship in the event of death or relationship breakdown. However, the specific rights granted to a partner vary significantly by province.

Provincial legislation does not always recognize common-law partnerships, particularly when an estate is probated (that is, proven in court and accepted as the last will and testament of the deceased). The result could be that the “wrong” person receives the value of a person’s estate.

Wills

It’s essential that you consider the implications of your death and arrange your affairs appropriately by preparing a will. To do this, keep the following considerations in mind.

Review your will any time your relationships change significantly, including living together, marriage, relationship breakdown, separation, divorce or death. Amend your will or prepare a new will as necessary.

By way of example, let's say Larry separates and subsequently enters into a common-law relationship with Kelly. Larry wants Kelly to get all of his assets at death. However, not only does Larry never get around to making a new will, he doesn’t get his divorce finalized.

Depending on how long they’ve been separated, the ex-spouse could receive the value of the estate as set out in the will depending on which province's legislation applies. At the very least, an expensive legal battle could result among the survivors.

Remember...

If you divorce, a will prepared prior to the divorce is not automatically revoked; however, a couple of provisions in that will are affected. First, any asset or bequest left to your now ex-spouse may be revoked. Second, your ex-spouse may not be permitted to act as your executor, so your estate would have to apply to the courts to have an executor appointed.

Relationships Matter

Educate yourself on the rules that apply to relationships in your province of residence, especially if you:

  • Have divorced or terminated a cohabitation relationship
  • Have entered into a cohabitation relationship

Beneficiary Designations

When relationships change, review your beneficiary designations. Consider who to name under your:

  • Life insurance and your accidental death (AD&D) insurance under your workplace benefits.
  • Personal life insurance.
  • RRSP and TFSA beneficiary designations.
  • Pension plan beneficiary designation. Your original spouse may still be entitled to a portion of your pension assets due to a divorce settlement agreement. Any subsequent will or amendment to your will cannot alter that.

Life Insurance and Child Support

Marriage breakdown often results in one parent agreeing to pay child support. The separation agreement may state that the support payments are to be protected by a life insurance policy on his/her life with the children as beneficiaries. Consider the risks if:

  • The policy is never put in place
  • The beneficiaries are changed at a later date
  • The money is paid out but the children are minors, so the trustee holds the funds in trust

Possible alternatives to discuss with an insurance agent include:

  • An irrevocable policy prohibiting the beneficiaries from being changed at a later date.
  • Paying the insurance premium amount to the other parent as part of the child support payment, so the custodial parent can take out the policy on the ex-spouse.
  • Naming the estate as the beneficiary and making a will to place the proceeds in trust for the children.

Most importantly, check with a lawyer to ensure that your will and beneficiary designations meet your obligations under any court judgements, separation or divorce agreements now in place.

Cohabitating?

A cohabitation relationship could include those between two people of the same or opposite sex who have lived together in a relationship of some interdependence for a period of time (usually two to three years or more) or if there is a child involved or if the cohabitants entered a provincially approved cohabitation agreement. Other relationship issues that could have estate implications include:

  • You may be considered to have more than one spouse at a time.
  • You may be separated from your spouse, but not yet divorced.
  • You may have just left a cohabitation relationship with another partner and entered into a new relationship with a third partner with whom you’ve had a child.