The Family Law Act, R.S.O. 1990, c. F.3 provides that when a spouse dies and the surviving spouse’s net family property[1] is less than the net family property of the deceased spouse, the surviving spouse may elect to take one-half of the difference between the net family property of the deceased spouse and the net family property of the surviving spouse (“equalization”).

Will vs. Equalization:

The general rule is that the surviving spouse must elect either equalization or to take under the deceased spouse’s will (or under intestacy, if he/she died without a will, or partial intestacy, if he/she died with a will which did not fully dispose of his/her assets), unless the will expressly provides a contrary intention.

Property Outside the Estate:

A surviving spouse who elects to take under the will (or under intestacy or partial intestacy) is entitled to receive any property passing to him/her outside the estate as a result of the first spouse’s death in addition to any gifts made to him/her under the will. This includes property that the spouses own jointly with right of survivorship as well as any property that passes to the surviving spouse as a result of beneficiary designation, such as proceeds of a life insurance policy or a registered retirement savings plan/registered retirement income fund.  However, if the surviving spouse elects equalization, he/she is not entitled to receive property passing to him/her outside the will in addition to the equalization payment, unless the deceased spouse indicated a contrary intention in writing.  The value of the property the surviving spouse receives outside of the estate, less any contingent tax liabilities in respect of the payment, is credited against the surviving spouse’s entitlement under equalization.

Process for Making the Election:

The election must be made in the prescribed form and filed with the office of the Estate Registrar within 6 months following the spouse’s death, unless the court orders an extension of time. If no election is made within the time period, the surviving spouse is deemed to have elected to take under the will/intestacy/partial intestacy.

Effect of Spouse Electing Equalization:

If the surviving spouse elects to receive equalization, then he/she is deemed to have predeceased the spouse and forfeits any gifts under the will, unless the will expressly provides otherwise. Further, if the surviving spouse is appointed estate trustee under the deceased spouse’s will and the surviving spouse elects to receive equalization, he/she is in an immediate conflict of interest with the estate and, therefore, cannot act as estate trustee.

Factors to Consider When Making the Election:

When determining whether a surviving spouse should elect equalization or to take under the deceased spouse’s will, it is important to consider the surviving spouse’s entitlement under the will as well as the assets he/she is recovering outside the will. If a surviving spouse has been left a life interest in the deceased spouse’s estate, he/she may wish to elect to receive equalization so that he/she receives a lump sum payment immediately, rather than be subject to income distributions throughout his/her lifetime.

There may also be non-financial reasons in making the decision. For example, if the surviving spouse elects to receive an equalization payment, any specific gifts of jewellery or other valuable or sentimental items which he/she would have received under the deceased spouse’s will would be forfeited.

Conclusion:

The decision to elect equalization or take under the will may be complex. It is recommended to obtain professional advice to assist in making the decision to elect equalization or take under the will.

[1] The computation of each spouse’s net family property is complex and requires a determination of each spouse’s property on the date of their marriage and on the day prior to the date of death of the first spouse. It is recommended to obtain professional assistance in ascertaining each spouse’s net family property.