Alberta Justice and Solicitor General

Table of Contents

INTRODUCTION .............................................................................................................. 1  

PROCESS ........................................................................................................................ 2  

SUMMARY OF INPUT ..................................................................................................... 4  Concerns About the Legislation ................................................................................................ 4  Advice for the Government of Alberta ..................................................................................... 10  Intestacy and Other Situations ................................................................................................ 16  Transitional Issues .................................................................................................................. 17  Parting Words of Advice ......................................................................................................... 19  

CONCLUSION ............................................................................................................... 23  

Appendix A – Online Survey

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INTRODUCTION

The new Wills and Succession Act came into effect in Alberta on February 1, 2012. This law

consolidates the Wills Act, Intestate Succession Act, Survivorship Act, Dependants Relief Act

and section 47 of the Trustee Act.

The Wills and Succession Act specifies how and to whom property is transferred when a person

dies. It is designed to make Alberta’s succession legislation easier to use and understand.

Among the changes made by the Act, there are amendments to the Matrimonial Property Act.

These amendments allow a surviving spouse to claim for matrimonial property division upon the

death of their spouse. These amendments, in section 117 of the Wills and Succession Act

(which for the purposes of this report are called the “legislation”), have not yet been proclaimed.

Once in force, the legislation would allow a surviving spouse to receive their share of the

couple’s matrimonial property following the death of his or her spouse. The couple does not

have to be divorced or separated for this claim to arise.

In calculating what amounts to a fair share of matrimonial property, the fact that the surviving

spouse is to receive an inheritance cannot be taken into account. This has the effect of creating

a presumption that the surviving spouse is entitled to both their share of the matrimonial

property from the estate and whatever inheritance is given by the deceased spouse’s will.

The valuation of the matrimonial property claim would include life insurance paid to third parties,

and would include non-estate property (i.e., assets that pass outside of the estate by way of

third party designation) of both spouses. The matrimonial property claim would be paid from

estate assets only.

Concerns have been raised about the effects of the legislation. To better understand these

concerns, Alberta Justice and Solicitor General undertook a consultation process. The process

involved two dialogue sessions with lawyers practicing wills and estates law and family law, as

well as an online survey open to the general public, and an opportunity for interested parties to

write directly to the Department.

This report summarizes the input received from participants in the dialogue sessions, the survey

and via direct correspondence. Quantitative results from the online survey are highlighted at

various points in the report.

The results of this consultation process will help the Government of Alberta determine how to

move forward with the legislation.

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PROCESS

To gather input from practitioners, two dialogue sessions were held: one in Edmonton on May

29, 2012; and one in Calgary on May 31, 2012. Invited attendees included lawyers working in

the fields of wills and estates, and family law. Attendees were sent a discussion guide in

advance, which provided context for the legislation.

At the dialogue sessions, a contextual presentation was made to attendees. This presentation

provided an overview of section 117 of the Wills and Succession Act. It also outlined a brief

history of the background behind this legislation, and summarized what the wills and estates bar

has previously said about the legislation.

Attendees were then invited to provide their views and perspectives on the following questions:

• Do you have any other concerns which have not already been outlined?

• What should happen to a surviving spouse’s inheritance, if some or all of the spouse’s

share of matrimonial property is taken from the deceased spouse’s estate?

a) What if there is no will? What should happen to the spouse’s inheritance under intestacy?

b) What if the will is unclear or there is no direction?

c) Transitional Issue – What if there is a will made before proclamation of the matrimonial

property amendments?

d) Transitional Issue – What if there is a will made on or after proclamation of the matrimonial

property amendments?

• Given that we have been using the former Dependants Relief Act to accomplish

matrimonial property division on death indirectly, what suggestions would you make as

to how to balance the principles of equitable matrimonial property division and

testamentary freedom?

A total of 42 individuals attended the two dialogue sessions.

To enable a broader number of people to participate in the consultation process, an online

survey was also made available from May 22, 2012 to June 8, 2012. This survey was posted on

the Alberta Justice website, along with background documents on the legislation and a

discussion guide. Various legal venues were given information about the survey in order to

maximize participation and demonstrate that an accessible forum for input existed.

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The online survey posed several hypothetical scenarios involving a surviving spouse and an

estate of the deceased spouse. The survey asked respondents what should happen in these

scenarios. A copy of the online survey is provided in Appendix A. In total, 121 Albertans

completed the online survey; one hundred respondents identified themselves as lawyers.

Overall, approximately 163 individuals participated in the consultation process.

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SUMMARY OF INPUT

Participants in the consultation provided a range of input about the legislation and how the

Alberta government might consider moving forward. A number of common themes emerged

from their views. These are presented below, organized by topic of discussion.

Concerns About the Legislation • Questions about the need for this legislation

Participants expressed support for the principle of achieving symmetry of matrimonial

property rights between divorce and death. However, many wondered why the

Government of Alberta felt it was necessary to introduce legislation to achieve this. In

particular, people wanted to know if the Alberta government felt Tataryn was not

working. Wills and estates lawyers have been undertaking estate planning consistent

with the Tataryn decision and have been advising clients accordingly. Consequently,

wills have been drafted with matrimonial property rights in mind.

In addition, participants pointed out that the provisions of the Dependants Relief Act

(“DRA”), now part of the new Wills and Succession Act, together with the Tataryn

and Siegel Estate decisions, effectively provide a route for surviving spouses to seek

remedy if their matrimonial property rights are not observed by the testator.

Participants expressed confusion, asking where the Alberta government saw a

problem and what it was trying to accomplish.

• Drafting could be improved.

Several participants said the legislation could be revised to offer better clarity in a

number of areas. People called the drafting “fuzzy”, saying it appears the underlying

philosophy has not been grasped as well as it could be. Specific comments and

concerns included the following:

o Provisions related to division of matrimonial property on death should be

consolidated in their own Division in the Matrimonial Property Act and the

Wills and Succession Act, as appropriate, to make for easier reading;

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o It needs to be clear what is included in “property used to pay funeral and

testamentary expenses” in section 7.1. of the amended Matrimonial Property

Act. Does this mean these expenses are to be deducted from the estate

before a matrimonial property calculation is performed?

o Sections should be written in as plain language as possible, particularly the

section related to “distribution of property” and “distribution of property if

spouse deceased” in the amended Matrimonial Property Act;

o Does section 16 of the amended Matrimonial Property Act effectively

abrogate the right of a person to secure property? As drafted, the section

suggests that a payment from the deceased’s estate must remain unsecured.

• Issues with the ability to contract out

Participants had concerns about the ability of spouses to “contract out” of the right to

make a matrimonial property claim against the deceased spouse’s estate. There are

suggestions in academia and the profession that this might be against public policy.

Some participants noted that Ontario’s legislation allows for contracting out, which

would seem to be an argument that public policy is not offended. Given the debate,

participants said, it should be explicitly stated in the Act that contracting out is not

against public policy. Otherwise, there is a risk that a court will declare otherwise and

nullify a contract that has been made between spouses.

• Application to Adult Interdependent Partners

There were mixed views about whether the legislation should apply to Adult

Interdependent Partners (AIPs). Some participants advised not to complicate the

legislation by trying to resolve the difficulties of the Adult Interdependent

Relationships Act through this process. They suggested the legislation should be

finished and implemented first; then the Government of Alberta can address the

policy question of extending the same basket of rights to AIPs.

Other participants strongly disagreed, saying that the rules applying to AIPs must be

made consistent with the legislation. Otherwise, they argued, AIPs will have different

and substandard rights and there is no guarantee the divergence will be later

resolved.

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• Effects on previous estate planning

A key concern was how the legislation will retroactively impact wills that have already

been drafted. People planned their estates and had their wills drafted in particular

ways, often already taking into account the principles of Tataryn and Siegel Estate.

Many individuals and families have made use of designations, insurance policies and

trusts to also make preparations so their families will be looked after and their wishes

carried out. The legislation will layer on a new level of rules, up-ending people’s

arrangements and potentially producing results that were not intended by testators.

Consequently, many individuals will need to revise their wills and estate planning.

This will be an unnecessary and unwelcome expense for people, who thought they

knew what the rules were. Furthermore, there are individuals who no longer have

capacity to revise their wills. As currently proposed, the legislation stands to

undermine these individuals’ wishes and they will be powerless to adjust accordingly.

Overall, the legislation may seriously undermine the principle of giving effect to

testators’ wishes.

• This creates adversarial situations

Another undesirable byproduct of the legislation, said participants, is that it will foster

conflict where none previously existed. There are differences between the situation

of a functioning, intact family and the situation of a broken family where intervention

is required. However, the legislation does not account for these differences. Instead,

it sets up an adversarial situation where the spouse (however happily married) goes

up against the deceased’s estate. As one person observed, “This is counterintuitive

to how we want people to behave.”

On that note, participants wondered whether the legislation would allow for an

executor to enter into a settlement agreement with the surviving spouse in order to

settle a matrimonial property claim. Several people said this should be permitted, just

as it is in divorce, in the interest of making things less adversarial and avoiding

expensive litigation which could drain the estate. To not allow agreements would be

“paternalistic”. Other people were not so sure, saying that agreements could have

the effect of frustrating the legislation. Participants said there needs to be clarity on

what is allowed.

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• Including proceeds of life insurance is problematic

Participants had sharp reactions to the concept of including life insurance proceeds

when calculating a matrimonial property claim. Objections included the following:

o Many testators have purchased life insurance policies as an estate planning

strategy in order to provide for children from a first marriage, make donations

to charity, or provide other gifts. They never expected these policies would be

used in the fashion contemplated by the legislation.

o The legislation changes the basis on which life insurance policies are sold.

This will have significant repercussions in the insurance market.

o Including life insurance proceeds will skew the matrimonial property claim

such that, after satisfying the claim, there will be insufficient monies left in

estates to provide for other beneficiaries.

o This concept will unfairly enrich the surviving spouse beyond what was

intended, to the detriment of the testator’s children.

o Insurance proceeds would not be included in a matrimonial property

calculation in the case of divorce. If the intent is to achieve symmetry, then

the same rules that apply to divorce should apply to death.

One sample scenario advanced by participants was that of the family farm.

Oftentimes the deceased has purchased life insurance policies as an estate planning

strategy, to leave cash gifts to beneficiaries without upsetting the farm’s operation.

(Especially when their only big asset is the farm, which may have been passed down

for generations.) Including life insurance may result in a claim that forces divesting of

the family farm – the very outcome the testator sought to prevent in the first place.

Some participants, however, said it might be appropriate to include life insurance

proceeds in the matrimonial property calculation. Their main argument was that the

life insurance policy was purchased with assets from the marriage, thereby making

the policy a “product” of the marriage. Half of the proceeds would therefore rightly

belong to the surviving spouse; the other half would belong to the deceased spouse

and could be transferred as the deceased intended. In addition, there is the reality

that life insurance pays out upon death. As one person said, “You can’t ignore that

the money is there.”

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• Inclusion of designations generally

Discussions about life insurance led participants to raise questions about

designations in general, and whether they should be included in the matrimonial

property calculation. One major question was feasibility. Since designations flow

outside of the estate, how would lawyers know about all the designations of a

deceased, let alone their values? Moreover, assuming one could determine which

designations existed, there would be difficulty getting a financial institution to share

information about these designations. How would counsel obtain the authority to

determine this information in order to undertake a matrimonial property calculation.

The issue of fairness was also raised. Participants said they support achieving

symmetry of matrimonial property rights between divorce and death. However, the

case of death should not have give spouses better rights than they would have in the

case of divorce. Including designations on death that are not included in divorce

would have the effect of unfairly enriching the surviving spouses’ rights.

Another major concern was the sanctity of inter vivos trusts. Participants noted that

courts have said the use of inter vivos trusts is not fraudulent, and these are

increasingly used as an estate planning tool. The legislation could impact inter vivos

trusts in ways that settlors had never contemplated, causing chaos in estate

planning.

• The issue of previous spouses

Participants expressed concern that the legislation will have unintended

consequences when it comes to previous spouses. Specifically, would it result in a

person’s death triggering new actions from their previous spouses? The matrimonial

property claims of previous spouses would have been settled upon divorce, perhaps

many years ago. However, previous spouses may decide to assert “potential” rights

under the legislation, resulting in bogus settlements paid out by the estate to avoid

litigation. While this might not be intended, it is a possibility the legislation will “open

the floodgates” in this manner.

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• Conflicts of interest will be a result

More conflicts of interest will be another unintended consequence of the legislation.

Participants explained that the executor of the deceased spouse will, in many cases,

be the surviving spouse, who will often be a second wife. If by exercising their

matrimonial property rights, the executor will impact the rights of another beneficiary,

the executor will be in a conflict of interest. This may prove a challenge, especially if

a substitute executor is not available. Furthermore, if the surviving spouse (who is

named executor) decides to advance a matrimonial property claim, counsel for the

estate can not act for the surviving spouse.

These real-life conflicts may not have been envisioned or considered. However, they

will cause difficulties in the administration of wills, costing estates more money in

legal fees than they otherwise would.

• The ability of spouses to “take twice” from the estate.

People had strong views about how the legislation would enable surviving spouses

to “take twice” from the estate. As currently drafted, the legislation entitles the

surviving spouse to make a matrimonial property claim, in addition to whatever gift

the testator has provided the spouse in the will.

Some people were fine with this approach, saying it was consistent with the

principles on which the legislation is based; namely, that a testator can not give away

what he or she does not own. Thus, a gift made to a surviving spouse is presumed to

come from the testator’s half of the matrimonial property, unless a contrary intention

is expressed. The result is that the surviving spouse can take half the matrimonial

property (to which he or she is entitled) and the gift made by the testator (from the

testator’s half of the matrimonial property).

A significant number of participants disagreed, arguing that many testators have

already structured their wills with the principles of Tataryn in mind. The gifts they

have made in their wills to their surviving spouses have been deliberately designed

to satisfy marriage equivalency. Allowing the surviving spouse to take the gift and

make a matrimonial property claim would effectively allow the surviving spouse to

“take twice” from the estate. This would be unfair, and would not be in keeping with

the testator’s intention.

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• Balancing testamentary intent with matrimonial property rights

Participants readily acknowledged that the legislation involves tension between the

principles of observing testamentary intent and respecting matrimonial property

rights. However, many participants said the legislation does not resolve this

balancing act in the most practical manner possible. Instead, the approach taken in

the legislation fails to recognize past legal developments and fails to recognize all of

the wills and estate plans that have been developed to date.

It was noted that the legislation changes the legal presumptions that Albertans are

familiar with, have become accustomed to, and followed in the crafting of their wills.

Average citizens, it was said, do not think in abstract legal terms, yet the legislation is

predicated on these. For example, many people will simply expect that if a property

is registered in their name then it is theirs to give away as they see fit; under the new

legislation this is not necessarily the case.

Consequently, wills that people have drafted will not generate the results they

intended -- even if the testator’s intent was to provide their spouse with an amount

equivalent to a matrimonial property entitlement. Furthermore, there are untold

numbers of Albertans who are preparing their own wills without the assistance of a

lawyer, or who have prepared holograph wills, and are doing so without

understanding of the application of the new legislation. This could cause huge legal

problems down the road.

Advice for the Government of Alberta Addressing Concerns About the Legislation

• The presumption about gifts to surviving spouses should be changed

A majority of participants said the presumption about gifts to surviving spouses

needs to be changed. The legislation, as presently drafted, enables the surviving

spouse to make a matrimonial property claim and take any gift provided to the

spouse by the testator. This presumes the testator made the gift with the

understanding it would come out of the testator’s share of the matrimonial property.

Participants said this presumption is not consistent with the presumptions people

have used when making their wills. Testators have not structured their wills based

with only “their half” of property in mind. Many testators would have difficulty

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understanding this abstract concept at all. Most people assume that if property is

registered in their name, then they own it and can give it away as they see fit.

As a result, the legislation will layer on a new approach and generate results that

people did not intend. People would have to re-write their wills to adapt to these

effects. This would not only be an unwelcome cost, but also impossible for some

testators; many no longer have the capacity to change their wills.

Participants suggested the presumption should be changed to an “either/or”

proposition. That is, it would be presumed that a surviving spouse is expected to

choose between the matrimonial property claim or the gift made to them in the will,

unless a contrary intention is expressed by the testator. This presumption would be

consistent with how people have drafted their wills in the past, making for an easier

transition without the complication of re-drafting old wills.

• A “top-up” approach should be used to effect the “either/or” choice

Participants talked about what mechanism should be used to effect to the “either/or”

choice made by a surviving spouse (i.e., between a matrimonial property claim and a

gift under the deceased spouse’s will). Many people cited Manitoba’s approach as

one to seriously consider.

Accordingly to participants, Manitoba subtracts the gift from the matrimonial property

claim. The calculated balance is given to the surviving spouse, along with the gift.

The surviving spouse’s matrimonial property claim is thereby satisfied without the

spouse “taking twice” from the estate. Many people looked favourably on this “top-

up” approach, noting this method would attempt to reflect the testator’s intention.

A number of people noted that the “top-up” approach is essentially how a DRA claim

functions. This led them to question why the government is layering an entire new

regime on top of existing processes, rather than adjusting existing processes. Some

participants observed that a DRA claim involves judicial discretion, which is not as

certain as a guaranteed right to half the matrimonial property. However, others noted

that judges must follow a two-part test in assessing a DRA claim; that test includes

consideration of legal obligations, such as matrimonial property. Given this, they

speculated that the DRA’s “top up” mechanism might be easiest.

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• An “election” should be used to effect the “either/or” choice

Another mechanism to effect the “either/or” choice would be to put the surviving

spouse to an election. Under this scenario, the surviving spouse would be forced to

choose between a matrimonial property claim, or the gift made to them under the

will. Over two-thirds of survey respondents (67.5 percent) identified this as their

preferred approach. Those who attended the dialogue sessions in Edmonton and

Calgary were less certain.

People who advocated for an election said it would be simplest for people to

understand and easiest to explain. Surviving spouses would have the ability to

assess their two choices. They could make an informed decision, since calculations

could be performed and presented to them.

However, others said an election could result in the surviving spouse ending up with

less than the testator intended. Since a strict “either/or” choice would be enforced,

the surviving spouse would not be able to receive both the gift and the matrimonial

property claim, even if this was the intention of the testator. To get around this

problem, testators could express a clear intention in their wills that they wish the

surviving spouse to receive both. However, this would require many people to re-

draft their wills, which would be costly and might be impossible.

• There needs to be symmetry when it comes to designations

There was strong opposition to including life insurance proceeds and other

designations in the calculation of matrimonial property. People argued that if the

ultimate objective of the legislation is symmetry (of matrimonial property rights)

between death and divorce, then the government “needs to compare apples to

apples”. Life insurance proceeds, it was said, are not included in a matrimonial

property calculation in a divorce situation; for symmetry, they should not be included

in the case of death.

Some others disagreed. They suggested that including life insurance proceeds would

be symmetrical because the proceeds could be considered a “product of the

marriage”. In divorce, assets that are generated during a marriage are considered

part of the matrimonial property. Life insurance policies purchased during a marriage,

which later yield payouts on death, might therefore be appropriate to include in the

death scenario.

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The issue of life insurance led some to suggest that valuation dates should also be

symmetrical between the divorce and death situations. People said the valuation

date for divorce situations (i.e., the date of trial) currently causes major problems in

divorce proceedings. A different valuation date for situations of death would

complicate things further. One piece of advice was that the valuation date for both

situations (death and divorce) be the date of separation, with the date of death

effectively serving as the date of the separation in the case of a deceased spouse.

• Be careful about what’s included in a matrimonial property calculation

Participants advised the Government of Alberta to think very carefully before

including life insurance and other designations in calculations of matrimonial property

on death. They offered numerous points of advice, including:

o Consider the fact that many people may have no estate. People might set up

inter vivos trusts and life insurance policies, which all flow outside the estate.

Including these in the calculation would result in a higher matrimonial

property claim, but there would be no assets available to satisfy the claim.

The legislation could encourage more estate planning of this kind.

o The inclusion of designations will compromise certainty. No beneficiary who

is given a gift under the will would have certainty, because the matrimonial

property claim would remain in flux until designations were known, identified

and considered. This would be an arduous task.

o Albertans want the freedom to plan their estate with insurance policies, inter

vivos trusts and other mechanisms. This legislation will curtail that freedom

by undermining the sanctity and predictability of those choices. That flies in

the face of the expectations and underlying philosophy of Albertans.

Some participants said the legislation goes too far in stipulating that life insurance

proceeds and other designations “must” be included in the matrimonial property

calculation. These people acknowledged that, in certain situations, it may very well

be appropriate to include life insurance proceeds. However, a blanket mandate that

these designations be included would be “an affront”.

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Participants urged the Government of Alberta to think about the consequences of

including certain designations in the calculation of matrimonial property on death.

The wrong decision could have unintended consequences on the ground, cause

serious problems for Alberta families and result in a greater level of litigation.

• Consider adding “section 8 factors” as a balanced approach

A possible solution advanced by participants was that section 8 of the Matrimonial

Property Act be amended to include additional factors. These factors could include:

o Life insurance proceeds payable to a surviving spouse;

o Gifts made under the deceased’s will to the surviving spouse;

o Other designations that might be considered products of the marriage.

Making this change would give courts the authority to consider these elements when

assessing a matrimonial property claim. This approach would enable life insurance

proceeds and other designations to be put in play on a case-by-case basis, without a

blanket requirement that they are always considered to be part of matrimonial

property.

• Use existing mechanisms and the common law

Several participants suggested that the Government of Alberta rethink its approach.

They expressed support for the objective of achieving symmetry of matrimonial

property rights between death and divorce. However, they felt that a more pragmatic

and less disruptive approach could be taken to achieve this objective.

People stressed that wills and estates lawyers have already been following the

Tataryn case and drafting wills accordingly. Furthermore, if a surviving spouse felt

that he or she did not get what they deserved under the deceased’s will, the spouse

could advance a DRA claim. With the Siegel Estate principles now entrenched in the

common law, the spouse’s DRA claim would effectively be a level equivalent to their

fair share of the matrimonial property claim.

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In essence, surviving spouses already have a path to secure their matrimonial

property using the present system. As one participant said, “This is a solution in

search of a problem, and it’s being done in the messiest way possible.” Some

participants reiterated their view that if the government feels DRA claims are too

discretionary or insufficient in some way, then it would be easiest to clarify and

strengthen the DRA provisions. This would avoid upending the current system and

provide fairness to surviving spouses.

Some participants suggested that the legislation could prove more challenging in the

long run. The common law, they said, is very good at evolving and reacting to

different fact situations. The Tataryn and Siegel Estate cases are examples of this

evolution, and wills and estates lawyers have responded accordingly. Legislation, by

contrast, is not dynamic and does not evolve quickly. In fact, some said, legislation

tends to “become fossilized and does not tend to allow for unique fact patterns.”

• Examine the experiences of other jurisdictions before moving forward

A key piece of advice was: don’t rush this. People said the Government of Alberta

should undertake research into the experiences of other jurisdictions that have

enacted legislation regarding division of matrimonial property on death. For example:

o How well has the legislation worked?

o Have people had difficulty changing their wills to adapt?

o What has the reaction of ordinary citizens been?

o What unintended consequences have resulted?

Some participants observed that the original Alberta Law Reform Institute report

(which led to the legislation) was written over a decade ago. It is based “on an old

world” that pre-dates certain salient cases that have changed the common law.

Some of the “problems” the report sought to address might not be problems

anymore.

In light of this, participants said they would like to see further research about the

effects of this kind of legislation in other places. Alberta should pursue this legislation

only if it is absolutely necessary and will work; not simply to “keep up with the

Joneses”.

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Intestacy and Other Situations • Follow the same rules and principles for intestate situations

Participants were asked for their advice about what should happen in situations of

intestacy. A consistent message was that the same rules and principles should apply

whether the deceased spouse has a will or dies intestate. As one person stated,

“The surviving spouse should be no better off in intestacy than they would

otherwise.” After all, the rules governing intestacy are meant to serve as a

“substitute” will.

Survey respondents shared this view. Half of respondents indicated that in situations

of intestacy, “there should always be an election by the surviving spouse” between

the intestacy amount or the amount of the matrimonial property claim. Another two in

ten (18.9 percent) indicated the intestacy amount should be deducted from the

matrimonial property claim.

When asked whether the surviving spouse should get “both a share under intestacy

and the matrimonial property claim from the deceased spouse’s estate”, 80.5 percent

responded in the negative.

• The rules for marshaling of assets need to be examined

One issue that could prove challenging is how to satisfy a matrimonial property claim

on death. There are likely to be cases where the estate does not have sufficient

assets to satisfy the claim and carry out all the wishes in the testators’ will.

(Especially if life insurance proceeds and other designations are included in the

calculation of matrimonial property.)

This raises the question of how assets should be marshaled to pay the claim. The

answer could have serious consequences. Participants provided examples where

this could prove particularly tricky, such as cases where the principle asset of the

deceased is a family business or the family farm. People wondered how these types

of situations would be handled; such as:

o Could a trust be imposed to satisfy the matrimonial property claim?

o Would businesses and farms need to be divested? In many cases this would

be an outcome that the testator sought to prevent in the first place.

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o Which beneficiaries would be the first to lose out on their gifts?

o Would an unsecured debt be the only way a surviving spouse could take their

entitlement, or could other mechanisms be used?

Survey respondents had diverse views about the marshaling of assets. They were

given a hypothetical scenario where a deceased spouse’s will expresses a desire for

the family farm, ranch or small business to be maintained by the family, but the

surviving spouse may have a claim to matrimonial property.

Almost a quarter (24.8 percent) said the farm or business should not be divested,

and if necessary, the matrimonial property claim should be satisfied by paying

business income to the surviving spouse or granting the spouse a life interest in the

farm. Another 12 percent said the issue should be left to the discretion of the court.

Almost one in ten (8.6 percent) said the testator’s intentions should always be

honoured.

Participants urged the Government of Alberta to carefully examine the effects of

marshaling rules on satisfying matrimonial property divisions on death before moving

forward with the legislation.

Transitional Issues • Having two regimes is not desirable

As currently drafted, the legislation would apply to situations where the date of death

is subsequent to proclamation. Since it would therefore apply to previously drafted

wills, participants were asked how the transition to the new legislation should be

managed.

One suggestion was to have the legislation apply only to wills made after the

legislation comes into force. This would eliminate retroactivity and prior estate

planning would be unaffected.

Over eight in ten survey respondents (81.0 percent) indicated preference for this

option. However, many attendees of the dialogue sessions said they disliked this

approach, because it would result in two legal regimes in place. Given longer life

expectancy, Alberta would be operating with two regimes for decades to come,

creating difficulties for the bar. People said it would be more manageable, and

simpler for the public, if one legislative regime applies to all wills, past and future.

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• Transition is only an issue if the legislation’s current presumptions are kept

A key observation was that transition to the new legislation will only be an issue if the

problematic presumptions in the legislation are not changed. (That is, the

presumption that the surviving spouse is entitled to both a matrimonial property claim

and a gift made to them under the testator’s will.) If this is kept, people’s wills will not

generate the effects they intended, and they will need to amend their wills. As

previously noted, many testators no longer have capacity to amend their wills; they

will have no recourse.

If the presumption is changed to an “either/or” presumption, as discussed earlier,

then previous estate planning will be less impacted. This will mitigate transition

concerns.

• Including life insurance proceeds in matrimonial property will be a problem

Another transition issue is the inclusion of life insurance proceeds in the calculation

of a matrimonial property claim. If this is kept, it will impact previous estate planning

and generate results that testators did not intend. Again, people will need to redraft

their wills to compensate, which may be costly or impossible. This transition problem

will be eliminated if life insurance proceeds are excluded from matrimonial property.

Participants speculated that the inclusion of life insurance could be a serious

problem for the Government of Alberta. It is likely the insurance industry will be

unhappy with this change. Countless life insurance policies have been sold on the

basis of an understanding about how life insurance operates, and how it is treated

under tax and estate law. As currently drafted, the legislation will change the rules of

the game, and retroactively apply to all life insurance policies that have been sold to

date. This will cause uncertainty in the insurance market and could affect insurance

payouts.

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Parting Words of Advice Attendees of the dialogue sessions in Edmonton and Calgary were asked to provide their

“parting words of advice” to the Government of Alberta, as it contemplates how to move forward

with the legislation. The following points were made:

• Consider doing nothing

People urged the Government of Alberta to consider abandoning the legislation. The

present system, they said, is “working well”. Wills and estates lawyers have been

following Tataryn and advising testators accordingly, such that many testators have

already made provision for their surviving spouses, in amounts generally equivalent

to a matrimonial property claim.

Those surviving spouses who find their deceased spouse has not made adequate

provision have the ability to make a DRA claim. A DRA assessment must now

consider the testator’s legal and moral obligations, including the sharing matrimonial

property.

Thanks to evolution in case law over the past decade, the present system is

effectively addressing the matrimonial property rights of surviving spouses. Given

this, the Government of Alberta should consider the possibility that the new

legislation is no longer required. As one person said, “If it isn’t broken, don’t try to fix

it.”

• If something must be done, do it as simply as possible

If the Government of Alberta feels that some kind of legislation (for division of

matrimonial property on death) is absolutely essential, then it should do this in the

simplest way possible. A whole new legislative regime may not be needed. Some

participants observed the desired result could be achieved simply by codifying

Tataryn and Siegel Estate so that a DRA claim can be used.

People also suggested adding factors to section 8 of the Matrimonial Property Act

would be an easier route. This would have the added benefit of giving the court

flexibility to consider life insurance proceeds and other designations.

As currently drafted, the legislation attempts to achieve the desired result “in one of

the messiest ways possible, by pulling the estate department into family law.” People

said there are easier ways to achieve the result, and those ways should be used.

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• Don’t fundamentally change the rules

On that same note, participants stressed the need to amend the legislation so that

the rules and presumptions people have relied upon are not fundamentally changed.

As one person described, the approach taken by the current legislation “is like saying

that all of a sudden the highest score wins in golf.”

Participants stressed that the retroactivity of the legislation is problematic because

basic presumptions are fundamentally changed. If this is corrected, then the effects

of the retroactivity will not be as bad, and estate lawyers will be able to “draft around

this”.

• Being able to prove exemptions is going to be hard

Participants warned that under the new legislation, people are going to have trouble

proving exemptions. Exemptions are hard to prove as it currently stands. Now the

legislation will potentially put the surviving spouse (who might also be the executor)

squarely at odds with the estate.

Much of the evidence that could prove exemptions will be trapped in the mind of the

deceased. Meanwhile, the surviving spouse will have the ability to destroy

documentation that could prove exemptions, if such documentation would undermine

the spouse’s claim. When it comes to exemptions, people said, the legislation is

“courting trouble”.

• Overall, the legislation is good but it needs some work

Several people said they liked the objective of the legislation; that is, achieving

symmetry of matrimonial property rights between divorce and death. They said that

overall, the legislation is good. However, the issues raised by participants need to be

addressed (namely the presumptions and inclusion of life insurance proceeds) and

the legislation “needs to be cleaned up”. Once issues are resolved and the legislation

is more clearly drafted, it will be good legislation.

• Keep your eye on the objective

Some participants advised the Government of Alberta to keep its “eye on the ball”.

The focus should be on working out the matrimonial property rights of the surviving

spouse. If that objective is kept in mind, and things are kept intellectually consistent,

then other issues will become easier to work through and deal with.

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• Make sure there is true symmetry

If symmetry between death and divorce is the objective, said participants, then the

rules for both should be the same. A surviving spouse should not find they would

have been “better off” if they had divorced before the death. However, a surviving

spouse should also not find themselves better off in the death scenario than if they

had divorced.

“Compare apples to apples”, participants emphasized. That includes having:

o The same exemptions;

o The same inclusions in what is considered matrimonial property;

o The same valuation dates; and

o The same limitation periods.

• Look hard before you leap

Before moving forward, the Government of Alberta should look at other jurisdictions

who have enacted similar legislation and determine what their experiences have

been. This includes other Canadian provinces, England, Australia and the United

States. People stressed the importance of speaking with practitioners in other

jurisdictions, not simply government officials. One suggestion was that the

Government of Alberta speak with members of wills and estates sections of the

Canadian Bar Association.

• Try to minimize conflicts and non-compatibility

When moving forward, consider taking an approach that is consistent with a

jurisdiction that has similar values to Alberta. In particular, the Manitoba approach

should be explored. It would offer a degree of compatibility with Alberta’s law.

Compatibility between Alberta and other jurisdictions will help minimize conflicts of

law, which are another challenging dimension of this whole issue.

• People need certainty

Participants urged the Government of Alberta to resolve challenges with the

legislation as soon as possible, and decide in a timely fashion whether and how it will

move forward. Lawyers need to be able to advise their clients, and therefore need

clarity. People reiterated that having the legislation (as currently drafted) apply

retroactively will also generate considerable uncertainty. Testators who can not

| 22 |

change their wills will not have certainty that their wills will generate the intended

results or that beneficiaries will receive what the testator intended. “People have

spent lots of money to plan their affairs,” explained one participant, “and this

legislation threatens all that.”

• The Government will need to inform Albertans

If the legislation moves forward unamended, then Albertans will need to be informed.

The legislation changes fundamental rules about will-making, using presumptions

that are not consistent with the way ordinary Albertans think. For this reason, the

public will need to be educated about what has changed. In the views of participants,

responsibility for educating Albertans will lie squarely with the Government of

Alberta. As one person stated, “The profession won’t wear this. We’re not going to

take responsibility for this change. This is a political decision and the politicians will

need to explain themselves.”

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CONCLUSION

Balancing a respect for testamentary intent with respect for matrimonial property rights must be

considered carefully. How the balance is achieved could have serious repercussions on Alberta

families for many years to come. As several participants observed, death is an inevitable part of

the human condition; this legislation, therefore, will impact every Albertan.

Thanks are extended to all those who participated in this consultation process. The insightful

views, perspectives and advice gained through this process will help inform the Government of

Alberta’s next steps. As these next steps are formulated, the need for timely resolution will be

considered. Members of the legal profession, courts, and all Albertans require legal certainty so

they can plan their affairs and make decisions with confidence and predictability.

Appendix 1 – Online Survey

Amendments to Alberta Matrimonial Property Act Consultation Online Survey – Final Summary

June 14, 2012 Profile of Respondents

A total of 121 Albertans completed an online questionnaire. The largest respondent groups were from Calgary (33.3%) and Edmonton (32.3%)

Almost all respondents were lawyers (101), five were interested citizens and one was an executor or estate administrator.

Table 1: Area of Province Represented (n=87) Postal Code Area Freq Valid* % Northwest (Grande Prairie, Peace River, rural) 1 1.1 Northwest central (Drayton Valley, Edson, Hinton, Spruce Grove, St. Albert, Whitecourt, rural)

3 3.4

East central (Camrose, Sherwood Park, Vegreville, Vermilion, Wainwright, rural) 4 4.6 Edmonton 28 32.3 South central (Airdrie, Innisfail, Olds, Red Deer, Sylvan Lake, rural) 7 8.0 Southeast (Brooks, Medicine Hat, Strathmore, rural) 6 6.9 Southwest (Canmore, High River, Okotoks, rural) 1 1.1 South (Coaldale, Lethbridge, Taber, rural) 8 9.2 Calgary 30 33.3

Table 2: Primary Interest in the MPA (n=107) Interest Freq Valid % Lawyer 101 94.4 Executor or estate administrator 1 0.9 Interested citizen, other than above 5 4.7

Results by Question Scenario #1: The deceased spouse has left a will but no testamentary instructions. S/he has been given an inheritance in the deceased spouse’s will. The surviving spouse does not already own all of her/his share of the matrimonial property. The surviving spouse can take some or all of her/his matrimonial property from the estate.

Question 1: What should happen? (n=115) Response Freq Valid % Surviving spouse elects to take either the share of her/his matrimonial property that s/he is entitled to take from the estate OR what s/he receives under the will of the deceased.

78 67.8

Deduct gift from claim – Any gift received under the will of the deceased spouse is deducted from anything received from the estate under a division of matrimonial property.

22 19.1

Deduct claim from gift – Anything received under a division of matrimonial property is deducted from any gift received from the estate under the will of the deceased spouse.

8 7.0

Surviving spouse receives both the share of her/his matrimonial property that s/he is entitled to take from the estate AND what s/he receives under the will of the deceased.

7 6.1

*Valid percent equals the number of responses (frequently) divided by the total number of respondents (n) to a question, rather than the total number of respondents to the survey.

Question 1-1: Suggest another option or comment on your choice. (n=35) Response Freq Valid % MPA has no place in estate law, it applies only to marital breakdown/don’t like the double-dipping resulting from bringing MPA into estate law

10 28.6

“Top up” to gift with MPA amount: Total amount received cannot be greater than that provided in MPA, when deducting gift from claim or claim from gift

7 20.0

Not clear on difference between deduction options; would like to see comparison of these to that of election/really confusing question

4 11.4

Right to claim is only triggered where testamentary provision is not adequate or does not meet provision in MPA/ Dependants’ Relief legislation is sufficient to address these issues

3 8.6

Gifts and MPA are separate: Total amount received cannot be less than that provided in MPA/ testamentary gifts are always in addition to MPA provisions

3 8.6

Don’t like election because this will adversely affect interests of surviving spouse

2 5.7

Election option reduces matrimonial claims/best honours intentions of testator 2 5.7 Election provision has been successful in Ontario and will be so here 2 5.7 Legislation permits testator to direct deduction, but otherwise no deduction of gift from claim

1 2.9

Any testamentary trust should be interpreted as a gift that precedes any calculation of gift to be deducted from claim

1 2.9

Question 2: To which wills should these rules apply? (n=117)

Response Freq Valid % Wills made AFTER amendments come into law 95 81.2 Wills made BEFORE amendments come into law 22 18.8

Question 2-2: Suggest another option or comment on your choice. (n=34)

Response Freq Valid % Only to wills made after because of unintended adverse effects on existing wills/could require significant work to change existing wills to ensure testator’s intentions are best effected/to minimize public disaffection and indifference to writing wills

12 35.3

To wills made before and after: court can take intention into account for wills made before amendments

6 17.6

No retroactive application to wills completed before amendments come into force

7 20.6

Applies to wills made before amendments to MPA only if the option of election is the change made/other options could greatly distort testator’s well-advised decisions

6 17.6

Amendments apply only where death occurred after s.117 coming into force

1 2.9

Matrimonial property claim applies to property at time of death 1 2.9 Applies to wills made after the amendments, including a 6-month notice period

1 2.9

Scenario #2: The deceased spouse has left no will. The surviving spouse is entitled to take some or all of her/his matrimonial property from the estate AND is also entitled to a share of the deceased spouse’s estate under Part 3 of the Wills and Succession Act (Distribution of Intestate Estates).

Question 3: What should happen to the surviving spouse’s share of the deceased spouse’s estate under intestacy? (n=107)

Response Freq Valid % There should always be an election by the surviving spouse/election between intestacy amount and MPA provisions

53 49.5

Intestacy claim to be deducted from any MPA share (if such claim made) 20 18.7 Entire estate/entire estate unless there are non-shared children of deceased, then election by surviving spouse

6 5.6

MPA share of any estate, with the rest to children 5 4.1 Should get intestacy provision with top up to MPA share from remaining estate

5 4.1

Receives MPA share then division of deceased spouse’s MPA share according to intestacy legislation

5 4.1

As worded in amendments: greater of 50% or $150,000 5 4.1 Whichever amount is greater: MPA provision or intestacy provision 4 3.7 Dependants’ relief only 3 2.8 Should get both intestacy provision and MPA provision 1 0.8

Question 4: Should the surviving spouse get both a share under intestacy and the matrimonial property claim from the deceased spouse’s estate? (n=114) Response Freq Valid % Yes (unqualified) 15 12.4 Yes, if matrimonial property claim is greater than intestacy claim 3 2.6 Yes, if shared with descendants (e.g. children from a previous marriage) 1 0.8 Total “Yes” 19 15.8 No (unqualified) 59 51.8 No, has to elect between intestacy share and matrimonial property share/whichever is larger

25 21.9

No, only intestacy share 4 3.5 No, intestacy deducted from matrimonial property claim 4 3.5 Total “No” 91 80.7 Entire estate to surviving spouse 2 1.8 Intestacy applies to remaining property after surviving spouse receives matrimonial property claim

1 0.9

Total Other 3 2.7

Scenario #3: The deceased spouse’s will says s/he wants the family farm, ranch or small business to be maintained by the family. The surviving spouse may have a claim to matrimonial property.

Question 5: How should the intention of the deceased be honoured, while satisfying the claim to matrimonial property? (n=106) Response Freq Valid % Matrimonial property share must always be paid, regardless of intentions/spouse should make election where there is a gift in the will

51 48.1

Where issue is maintaining farm/business operations, where MPA cannot be satisfied otherwise, business is not to be liquidated, rather, spouse is paid from business income or gets life interest in farm

26 24.5

Left to discretion of the court 14 13.2 Deceased’s intentions should always be honoured, e.g. death does not trigger MPA; inter vivos arrangements are not revisited; subject only to Dependants’ Relief provisions

9 8.5

Not sure/uncertain/don’t know 6 5.7

Question 6: Please review the list of concerns already raised by estate practitioners in Alberta. What additional concerns, if any, do you have about the proposed amendments to the Matrimonial Property Act? (n=73) Response Freq Valid % Nothing additional/all of those listed 28 38.4 All the potential costs that will accompany these changes, especially if retrospective, e.g. to prepare new wills, implement new estate strategies, potential expense/liability for lawyers to ensure all clients are made aware of these changes, potential for increased post-mortem litigation

19 26.0

Insurance being included in MPA calculations/impact on inter vivos trusts and other property specifically intended to benefit someone other than spouse

11 15.1

Instead of changing the MPA, just make necessary amendments to the Dependants’ Relief Act, as only a small number of Albertans require this kind of protection.

5 6.8

Some provisions have to be made where spouse is inheriting property that originated with a previous spouse of deceased person, resulting in an unjust disposition of property that properly belongs to descendants or other family of that previous spouse

4 5.5

Estates should be speedily resolved, so must mandate time period for spouse to make election

2 2.7

What is potential impact on prenuptial and cohabitation agreements? 2 2.7 Para. 7.1(1)(e) is too broad and unduly burdens estate freezing 1 1.4 Financial care of minor children 1 1.4

Question 7: Any other advice you would like to give the Government of Alberta about implementing the proposed amendments to the Matrimonial Property Act? (n=59) Response Freq Valid % Don’t do it! It is inefficient, unnecessarily complex, addresses no real need/more respect to testator intention/large numbers of people will not be able to afford to have their estate interests protected/these issues well addressed by other legislation/interferes with property rights

22 37.3

I believe an election mechanism is the most just and equitable way to proceed. 12 20.3 Consultation of ALRI should result in legislation that more closely follows those recommendations. If not, then at least those most impacted by and best informed on the issues should be more comprehensively consulted before proposed legislation reaches this point in development

11 18.6

There should be no retrospective application of these amendments, to avoid confusion and undue burdens on existing wills and testators

7 11.9

Just get it done already/use what is working in other jurisdictions re: top-up and election methods

6 10.2

Take the additional and necessary steps to bring professionalism to will creation, e.g. do not provide “will kits”, do not recognize holographic wills, create a will registration system

1 1.7