I have suggested in a previous blog that failing to formally deal with the consequences of marriage breakdown might avoid strife in the present, but is a sure-fire way to leave your heirs some litigation along with your assets.
As the rate of later-in-life marital breakdowns continues to rise, these issues become increasingly important. It is common for older spouses to separate but not bother with the formality of divorce. However, that former spouse, with whom the deceased has not lived for decades, will still be entitled to inherit a preferential share of the estate on intestacy, or may still be the beneficiary of RRSPs, pension benefits, insurance proceeds, or distributions in the Will.
Facts
In Daley v. Daley, 2015 ONSC 6741 Mr. Daley did the prudent thing and decided to revise his estate plan. He and Ms. Daley were married in 1990 and had been separated since 1999, but never divorced. It was a second marriage for both, and both had children from their first marriages. Following separation the parties remained in close contact, speaking on the phone almost daily, and had an amicable relationship. Ms. Daley had developed health problems shortly after the parties’ marriage, and had not worked since 1991. Mr. Daley provided her with ongoing financial support on an informal basis for many years. This included both monthly payments and larger occasional lump sum amounts.
In May of 2014, Mr. Daley phoned Ms. Daley to let her know he had decided to update his Will, and they met to discuss his intentions.
What happened next no doubt came as a shock to Mr. Daley. Promptly after hearing of Mr. Daley’s plans, Ms. Daley attended the TD Bank in Cornwall and, using Mr. Daley’s banking Power of Attorney (Mr. Daley had named her as attorney back when they were married), transferred approximately $20,000 from his chequing and savings accounts onto his line of credit and then had a bank draft issued in her name for $22,000.00, which represented the entire credit available on Mr. Daley’s line of credit. She used that money to buy herself a new car, and then gave her daughter the remaining $7500.
Next, Ms. Daley phoned the police and reported that Mr. Daley had been harassing her. When he attempted to phone her just to check in on her, as was his custom, his call was returned by the police. Shortly thereafter, he discovered the missing funds.
Proceeding before the Superior Court
This series of events, not surprisingly, prompted both parties to seek a divorce. In this proceeding, before Madam Justice Warkentin, Ms. Daley claimed the parties had only separated in May 2014, and that she was entitled to an equalization payment and spousal support. Mr. Daley claimed they separated in 1999, the equalization claim was statute barred, and he had more than satisfied any support obligation, given that he had been providing Ms. Daley with approximately $1200 a month in support since the parties separated, in addition to lump sum payments that in some years totaled over $20,000. The maximum amount recommended by the Spousal Support Advisory Guidelines for a marriage of 9 years, taking into account the parties’ incomes, is $800/year.
Ms. Daley also sought a finding that the $22,000 she removed from Dr. Daley’s account was a gift to her. Mr. Daley obviously opposed.
The trial judge found in favour of Mr. Daley on all counts. The parties had essentially equalized their property in 1999 when they sold the matrimonial home and purchased separate residences. Any equalization claim was now statute barred, given that parties only have 6 years from the date of separation to bring an equalization claim (Family Law Act, s. 7(3)). And the $22,000 was most certainly not a gift: as the trial judge explained, “there is nothing in those [Power of Attorney] documents that provided her with the authority to use the Powers of Attorney for her own benefit” (at para. 96).
Analysis
Mr. Daley’s decision to revise his Will prompted this litigation, which is unfortunate. However, it also pre-empted the estate litigation that would certainly have ensued after his death had he not addressed the problem head on when he did. Furthermore, it potentially saved him and his children the endless grief that would have resulted had Mr. Daley become incapable with Ms. Daley still named as his attorney for property.
Here was a former spouse with whom Mr. Daley had maintained a close and amicable relationship for 15 years post separation. She remained his attorney for property and likely a major beneficiary under his Will. He provided her with ongoing support whenever she needed money. Indeed his evidence, as related by the trial judge, was that “if she had told him [in May 2014] she needed money, he probably would have made arrangements to provide her with the funds she wanted, as he had always done in the past” (at para. 45).
Up until May 2014, then, Ms. Daley was in an excellent position to obtain maximum benefit from Mr. Daley’s estate. Even if Mr. Daley had not provided extensively for her in his Will, she likely could have convinced a court (in the absence of contradictory evidence from Mr. Daley) that they had never formally separated, and could have elected to take an equalization payment rather than her entitlement under the Will (see s. 6 of the Family Law Act). Either way, she would have had a strong claim to dependants’ support, given that Mr. Daley had been providing her with ongoing financial assistance.
And had Mr. Daley lost capacity, she could have used his Power of Attorney to help herself to his assets. Given her cavalier attitude toward her fiduciary duty as an attorney, it is more than likely she would have abused this position. (Indeed, her evidence at trial was that she had regularly used the Power of Attorney, apparently without Mr. Daley’s knowledge, to review the status of his bank accounts.)
There would have been power of attorney litigation, followed by estate litigation, all depleting Mr. Daley’s assets. His children would have gotten involved, as would hers. Meanwhile, with Mr. Daley either dead or incapable, there would have been no clear evidence of his wishes or intentions, and the families on either side would have been pitted against one another, with the deceased Mr. Daley in the middle no longer able to make his views known.
However unpleasant the resulting family law litigation may have been for Mr. Daley, then, in light of the possible alternatives, I think his decision to update his Will and powers of attorney (and to divorce Ms. Daley) was a good one.
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Written by: WEL Partners
Posted on: November 22, 2015
Categories: Commentary
I have suggested in a previous blog that failing to formally deal with the consequences of marriage breakdown might avoid strife in the present, but is a sure-fire way to leave your heirs some litigation along with your assets.
As the rate of later-in-life marital breakdowns continues to rise, these issues become increasingly important. It is common for older spouses to separate but not bother with the formality of divorce. However, that former spouse, with whom the deceased has not lived for decades, will still be entitled to inherit a preferential share of the estate on intestacy, or may still be the beneficiary of RRSPs, pension benefits, insurance proceeds, or distributions in the Will.
Facts
In Daley v. Daley, 2015 ONSC 6741 Mr. Daley did the prudent thing and decided to revise his estate plan. He and Ms. Daley were married in 1990 and had been separated since 1999, but never divorced. It was a second marriage for both, and both had children from their first marriages. Following separation the parties remained in close contact, speaking on the phone almost daily, and had an amicable relationship. Ms. Daley had developed health problems shortly after the parties’ marriage, and had not worked since 1991. Mr. Daley provided her with ongoing financial support on an informal basis for many years. This included both monthly payments and larger occasional lump sum amounts.
In May of 2014, Mr. Daley phoned Ms. Daley to let her know he had decided to update his Will, and they met to discuss his intentions.
What happened next no doubt came as a shock to Mr. Daley. Promptly after hearing of Mr. Daley’s plans, Ms. Daley attended the TD Bank in Cornwall and, using Mr. Daley’s banking Power of Attorney (Mr. Daley had named her as attorney back when they were married), transferred approximately $20,000 from his chequing and savings accounts onto his line of credit and then had a bank draft issued in her name for $22,000.00, which represented the entire credit available on Mr. Daley’s line of credit. She used that money to buy herself a new car, and then gave her daughter the remaining $7500.
Next, Ms. Daley phoned the police and reported that Mr. Daley had been harassing her. When he attempted to phone her just to check in on her, as was his custom, his call was returned by the police. Shortly thereafter, he discovered the missing funds.
Proceeding before the Superior Court
This series of events, not surprisingly, prompted both parties to seek a divorce. In this proceeding, before Madam Justice Warkentin, Ms. Daley claimed the parties had only separated in May 2014, and that she was entitled to an equalization payment and spousal support. Mr. Daley claimed they separated in 1999, the equalization claim was statute barred, and he had more than satisfied any support obligation, given that he had been providing Ms. Daley with approximately $1200 a month in support since the parties separated, in addition to lump sum payments that in some years totaled over $20,000. The maximum amount recommended by the Spousal Support Advisory Guidelines for a marriage of 9 years, taking into account the parties’ incomes, is $800/year.
Ms. Daley also sought a finding that the $22,000 she removed from Dr. Daley’s account was a gift to her. Mr. Daley obviously opposed.
The trial judge found in favour of Mr. Daley on all counts. The parties had essentially equalized their property in 1999 when they sold the matrimonial home and purchased separate residences. Any equalization claim was now statute barred, given that parties only have 6 years from the date of separation to bring an equalization claim (Family Law Act, s. 7(3)). And the $22,000 was most certainly not a gift: as the trial judge explained, “there is nothing in those [Power of Attorney] documents that provided her with the authority to use the Powers of Attorney for her own benefit” (at para. 96).
Analysis
Mr. Daley’s decision to revise his Will prompted this litigation, which is unfortunate. However, it also pre-empted the estate litigation that would certainly have ensued after his death had he not addressed the problem head on when he did. Furthermore, it potentially saved him and his children the endless grief that would have resulted had Mr. Daley become incapable with Ms. Daley still named as his attorney for property.
Here was a former spouse with whom Mr. Daley had maintained a close and amicable relationship for 15 years post separation. She remained his attorney for property and likely a major beneficiary under his Will. He provided her with ongoing support whenever she needed money. Indeed his evidence, as related by the trial judge, was that “if she had told him [in May 2014] she needed money, he probably would have made arrangements to provide her with the funds she wanted, as he had always done in the past” (at para. 45).
Up until May 2014, then, Ms. Daley was in an excellent position to obtain maximum benefit from Mr. Daley’s estate. Even if Mr. Daley had not provided extensively for her in his Will, she likely could have convinced a court (in the absence of contradictory evidence from Mr. Daley) that they had never formally separated, and could have elected to take an equalization payment rather than her entitlement under the Will (see s. 6 of the Family Law Act). Either way, she would have had a strong claim to dependants’ support, given that Mr. Daley had been providing her with ongoing financial assistance.
And had Mr. Daley lost capacity, she could have used his Power of Attorney to help herself to his assets. Given her cavalier attitude toward her fiduciary duty as an attorney, it is more than likely she would have abused this position. (Indeed, her evidence at trial was that she had regularly used the Power of Attorney, apparently without Mr. Daley’s knowledge, to review the status of his bank accounts.)
There would have been power of attorney litigation, followed by estate litigation, all depleting Mr. Daley’s assets. His children would have gotten involved, as would hers. Meanwhile, with Mr. Daley either dead or incapable, there would have been no clear evidence of his wishes or intentions, and the families on either side would have been pitted against one another, with the deceased Mr. Daley in the middle no longer able to make his views known.
However unpleasant the resulting family law litigation may have been for Mr. Daley, then, in light of the possible alternatives, I think his decision to update his Will and powers of attorney (and to divorce Ms. Daley) was a good one.
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