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Part 5 – Legal Constraints on Your Wishes: A Guide to Restrictions on Testamentary Freedom

In the realm of estate planning, testamentary freedom is a foundational principle that allows individuals to distribute their assets as they see fit. However, in Ontario, as in many jurisdictions, this freedom is not absolute. Several pieces of legislation, including Ontario Family Law Act and the Succession Law Reform Act, impose specific limitations and safeguards to ensure the protection of the interests of spouses and dependants. In this blog, we will delve into the intricacies of these limitations and how they impact your estate planning decisions.

1. The Ontario Family Law Act 

The Family Law Act places restrictions on testamentary freedom by safeguarding the interests of surviving spouses. Under the Family Law Act, a surviving spouse may elect to receive their entitlement under the deceased’s will or opt for a division of net family property known as equalization. This division is calculated based on the difference in value of the deceased’s and the surviving spouse’s net family property as of the date of the deceased’s death. This process resembles the division of assets in separation/divorce proceedings. It is highly recommended that a surviving spouse carefully assess the best course of action, as opting for a division in net family property may disentitle the surviving spouse to any inheritance under the deceased’s will.

It’s important to note that the entitlement to a division of net family property under the Family Law Act is limited to married spouses. As such, common-law spouses do not have a statutory right to your estate. Therefore, it is imperative that if you wish to provide for your common-law spouse after your passing, your will should make adequate provisions.

2. Dependants’ Claims

The Succession Law Reform Act also introduces limitations on testamentary freedom through dependants’ relief claims. If an individual fails to make adequate provisions for their dependants in their will, dependants have the right to seek support from the estate. Dependants are individuals whom the deceased was providing support for or was under a legal obligation to support immediately prior to their death. Dependents can include spouses (both by marriage and common-law partners), children, parents, or a brother or sister of the deceased. These claims can potentially override the deceased’s testamentary wishes to ensure that dependants are not left in financial distress.

It’s worth noting that the courts have various interpretations of what constitutes a dependant. Therefore, seeking legal advice is essential to determine if there are unintentional dependants who may override the provisions of your will.

3. Creditors’ Claims

Testamentary freedom is not solely limited to familial considerations. While not codified in legislation, Ontario common law has long held that creditors also have rights to claim against a deceased person’s estate. If the deceased leaves behind outstanding debts, these debts must be settled from the estate’s assets before beneficiaries receive their inheritances. This can significantly reduce the amount ultimately distributed to beneficiaries. Executors should take extra care to determine if the deceased had any outstanding debts, as failure to do so may result in the executor being personally liable for such debts. 

4. Charitable Gifts

Even charitable gifts, often considered a noble aspect of estate planning, may be subject to limitations under certain circumstances. If a charitable gift would result in inadequate support for dependants or surviving spouses, a court may alter the distribution to ensure the financial well-being of those protected by the Succession Law Reform Act.

Final Thoughts

While testamentary freedom remains a cornerstone of estate planning, it is essential to understand and navigate the limitations imposed by both Ontario and Canadian legislation. These limitations are in place for a variety of reasons, including to safeguard the interests of spouses, dependants, and creditors. Therefore, a comprehensive estate plan should not only reflect your desires but also adhere to the legal framework in Ontario. Consultation with an experienced estate lawyer can help you strike the right balance between your testamentary wishes and the legal obligations imposed by these acts.