In the age of the “modern family,” urging clients to make a will is more important than ever for financial advisors.
This advice is especially crucial for blended families with stepchildren. A recent case from the Alberta Court of Appeal (ACA) shows the potentially disastrous outcome for stepchildren if their stepparent dies intestate.
In September, the ACA handed down a decision dismissing an appeal made by four stepdaughters who claimed they should be entitled to shares of their stepmother’s estate, equal to that of their stepbrother, who was the only biological child whom their father had with their stepmother.
In the ACA’s decision, Peters v. Peters Estate, released in September 2015, Madam Justice P.A. Rowbotham wrote: “The underlying theme of the appellant’s submissions is that the result is unfair.”
However, Rowbotham added, this case is an example of the personal difficulties and harm to relationships that can occur when an individual dies intestate.
The facts show that the children (step- and biological) all assisted, financially and otherwise, in the maintenance of Lester and Ileen Peters. All the Peterses functioned as a family unit for many years, and all five of the adult children worked together to provide for Ileen.
When Lester died intestate, all five adult children agreed that Ileen should receive all of their father’s estate. Unfortunately for the stepdaughters (Lester’s children born prior to his marriage to Ileen,) Ileen also died without making a will.
The stepdaughters argued in their initial application to the court that the law, as it stands, “fails to recognize the need to protect blended families.” However, Rowbotham wrote in the ACA decision, stepchildren simply do not have the same rights as natural and adopted children when a parent dies intestate.
The ACA had no power to change the legislation, says family and estates lawyer Karon Bales, partner with Bales Beall LLP in Toronto.
Ontario’s intestate legislation is no different from Alberta’s regarding stepchildren. Even if your client’s family is uncomplicated, their children’s families may be blended, Bales says. Therefore, she advises, clients should undertake proper will planning to cover the range of blended family possibilities. For example, a client may treat the stepchild of his or her child as a grandchild, but that child will not be recognized as a grandchild if the client dies intestate.
The same is true in British Columbia, says Kathleen Cunningham, executive director of the British Columbia Law Institute in Vancouver. Stepchildren are not a recognized legal concept under intestate legislation.
In the Peters case, the stepdaughters argued that the lower court’s judge erred in his interpretation of the Wills and Succession Act by not enabling blended family protection.
The stepdaughters also argued that the lower court’s judge failed to find the existence of a trust, which would legally enable the stepdaughters’ claims as beneficiaries under the estate.
To support the stepdaughters’ first argument, they presented fresh evidence showing “clear and true representation of this family,” such as family photos and communications.
The ACA ruled the evidence to be inadmissible: “While the proposed fresh evidence is demonstrative of the relationship between the deceased and two of her stepdaughters, the main issue is whether the legislation includes stepchildren as beneficiaries of an intestate.”
The stepdaughters also presented evidence that, they argued, was proof their brother, Gordon, was to hold the estate assets in trust to be equally distributed among the children. The ACA disagreed: that evidence “does not provide evidence that the deceased [Ilene] expressed her intentions to the alleged trustee [Gordon] as required by law.”
The Peters case turned on how stepchildren are undefined within legislation. They are not considered descendents, as a descendant is legally defined as “a blood relative.”
Nor are stepchildren to be found under a legal definition of “child.” The Alberta Wills and Succession Act does not include a definition of “child,” according to the ACA decision.
Moreover, Rowbotham wrote: “We note that intestate succession legislation in Alberta has historically excluded stepchildren from inheriting the estate of an intestate step-parent.”
The decision pointed to recent studies by the Alberta Law Reform Institute, which concluded: “The relationships between stepchildren and step-parents are too variable to support a presumption that a majority of stepparents intend their stepchildren to inherit in their estate.”
Intestate legislation in Ontario has not been changed since 1978, says Bales, with the exception of the definition of “spouse,” which now is gender-neutral.
Bales notes common-law spouses are treated similar to stepchildren when one common-law spouse dies intestate. Both these issues are regular topics of discussion in the wills and estate-planning course that Bales teaches at the University of Toronto.
But until the law changes, your clients should not be among the almost 50% of Canadians without a will, says a report released by Toronto-based Canadian Imperial Bank of Commerce in August.
You can assist your clients in preventing debacles like the Peters’ from happening. “Financial advisors are in a unique position,” says Jag Gandhi, associate with Wilson Vukelich LLP in Markham, Ontario. “They get to know a family quite well. [Advisors can be] “issue identifiers” for both their clients and for lawyers who draft their clients’ wills
Gandhi echoes the warning from the Alberta court: “Urge clients to be proactive and think through all the issues that can affect their will [and ] estate planning.”
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