The Family Law Act (the Act) makes provision for an equalization claim by a surviving spouse. Section 6(2) of the Act allows a surviving married spouse (i.e. not a common law spouse) to elect between his or her succession rights under a will and his or her equalization claim under the Act.

For example, a husband dies and leaves an estate worth $2,100,000.00. In his will he leaves a bequest of $100,000.00 to his wife and the balance of his estate to his secretary. The surviving wife has a period of 6 months from the date of death to file her election if she wishes to make an equalization claim under the Act. In order to determine what is most beneficial for the surviving spouse she has to make a calculation of the value of her equalization claim. In order to make that calculation the surviving wife has to determine her Net Family Property (NFP) and the NFP of the husband. This requires knowing the values of all assets and debts of the parties at the date of marriage and at “valuation date”.

To continue with our example lets assume that that at the date of marriage they had no property. At “valuation date” the husband had $2,100,000.00 and the wife had $1,000,000.00 in net assets. [Note: In the case of a separation “valuation date” is the date of separation. In the case of an equalization claim following a death “valuation date” is the day before death]. Based on the facts set out above the surviving wife’s equalization claim would be ($2.1M – $1.0M = $1.1M / 2 = $550,000.00). Based on those facts, it would be financially advantageous for the wife to make an election to make an equalization claim (worth $550,000.00) rather than take her bequest under the will.

If the wife made the necessary election within the 6 month time limit, her right to an equalization claim would have priority over bequests in the will and dependents relief claims (other than dependent relief claims by the deceased’s children).

Recent statutory amendments have clarified the credits which are to be made against a surviving spouse’s equalization entitlement. The credits listed are as follows:

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  • a) Benefits payable to the spouse pursuant to a life insurance policy on the life of the deceased spouse;
  • b) Lump sum benefits payable to the spouse pursuant to pension or similar plan payable as a result of the death of the deceased spouse; and
  • c) The value of property or a portion of property to which the surviving spouse becomes entitled by right of survivorship on the death of the deceased spouse.

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So, in the example above, if the wife was, together with her husband, the joint owner of a home which had equity of $1.1M she would receive a benefit of $550,000.00 by way of survivorship. This “credit” would eliminate her equalization claim. In this circumstance the wife would be advised to take the said survivorship interest and the bequest under the will.

It quickly becomes apparent how complicated these sorts of cases can become. In real cases this complexity is often magnified by the difficulty in getting the necessary financial disclosure to make the necessary calculations in a timely fashion. Anyone considering making an election pursuant to the section 6(2) of the Act should obtain good legal advice and should do so as soon as possible.

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