When should you consider a spouse trust for your will?

When should you consider a spouse trust for your will?

Posted March 13, 2017 Category: Individuals/Families

Most of us can agree: doing what it takes to leave a harmonious legacy to our loved ones on death is a worthwhile endeavor.

A spouse trust can be a simple and effective way to accomplish this goal, especially if you are in a second marriage and have children from a previous relationship. By creating a spouse trust in your will, it allows your surviving spouse access to the money and/or property required to maintain the standard of living they enjoyed prior to your death. On your spouse’s death, the money or property remaining in the spouse trust then passes to your children, or to the stated beneficiaries in your will (“your ultimate beneficiaries”). Since your surviving spouse has no ownership interest in the trust, the trust funds cannot be given to anyone else during or after his or her lifetime.

A spouse trust may be recommended even if you are in a first marriage. If you die and your surviving spouse remarries, their will is automatically revoked, meaning that the wills you drafted together with mutual intentions will not apply after a remarriage. As a result, on the death of your surviving spouse, either intestacy laws will take effect if she or he has not completed a new will, or the provisions of a new will following the remarriage take effect.

Here are two scenarios in which you are married and then die leaving everything to your surviving spouse outright, not in a spouse trust:

Scenario 1 – Surviving spouse forgets to draft a new will after remarriage

Years later, your spouse remarries, but forgets to draft a new will and dies survived by your children and his or her new spouse.

According to Ontario intestacy laws, the new spouse would be entitled to the first $200,000 of your spouse’s estate as well as an equal division of the rest of the estate with your surviving children. If, at your spouse’s death, there was $1M remaining from your legacy and you had two surviving children, the new spouse would be entitled to $466,666 of your estate and each of your children would receive $266,666.

Scenario 2 – Surviving spouse drafts a new will after remarriage

Your spouse remarries years after your death, but this time remembers to draft a new will. Unless he or she has contracted out of his or her legal obligations with a marriage contract, there may be an obligation on your spouse to leave a significant portion of the estate to their new spouse, regardless of whether their new will leaves everything to your ultimate beneficiaries or not. If provision is not properly made for the new spouse in the will, the new spouse can either make an equalization claim under the Family Law Act or bring a Succession Law Reform Act dependent’s support relief claim against the estate, which even if not successful, will undoubtedly lead to expense, stress and disharmony among your loved ones.

Neither of these scenarios is likely to provide the result you intend.

It may be appropriate for you to consider a spouse trust in your will to ensure your estate provides for your surviving spouse during his or her lifetime and then on your spouse’s death passes your remaining estate your ultimate beneficiaries.

An experienced estate planning lawyer can assist you by evaluating your situation to determine if a spouse trust is appropriate, provide estate planning advice to be sure the trust is effective, and draft a sound will to ensure your wishes are fulfilled after you are gone.

Posted March 13, 2017 Category: Individuals/Families

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