Family dynamics are complicated, perhaps more so than ever before. Yet despite the growing prevalence of blended families, people still put off writing or updating an estate plan. This can have catastrophic consequences.
Imagine a long-term common-law spouse receiving nothing on an intestacy while the deceased’s children from a prior relationship inherit the entire estate. Or imagine a poorly drafted will that results in a second spouse receiving the entire estate to the exclusion of the deceased’s children from a prior relationship.
When working with blended families, estate lawyers need to dig deep into clients’ motivations and intentions. Is there a cottage that has been in the family for generations, which should pass to the children but also be enjoyed by the second spouse? Are there obligations to a prior spouse that must be addressed? Are there stepchildren the client wishes to treat as their own?
And what are the family dynamics like? Does everyone get along? Or is dissension likely, leading to disputes and even litigation after the client’s death?
Without proper estate planning, aggrieved spouses or children in a blended family can bring claims against an estate.
A dependant’s relief claim can be brought by certain family members who were receiving support from the deceased or whom the deceased had a legal obligation to provide support to, and who are not adequately provided for from the deceased’s estate.
Married spouses may make an equalization claim for a share of the increase in the value of property during the marriage.
Individuals can also challenge the validity of a will by claiming that the deceased was unduly influenced by a second spouse, or that there were suspicious circumstances in the preparation of the deceased’s will.
These four estate planning strategies represent best practices.
1. Spouse trusts
A spouse trust typically involves all or a portion of a deceased’s estate being held in trust for the spouse’s benefit during the spouse’s lifetime, or for a shorter period. The spouse can be married or common-law.
For the trust to qualify for a rollover of any capital gains arising on the death of the first spouse, the surviving spouse must be entitled to receive all the income of the trust during their lifetime. No one other than the spouse can be entitled to receive or use the income and capital of the trust.
These trusts can provide for the succession of capital. The will can direct that assets should pass to the trust, to be held for the spouse’s benefit. It can also direct to whom the remainder of the trust should pass on the spouse’s death or earlier termination of the trust.
To preserve the capital value for the beneficiary who ultimately receives the remainder of the trust, it can be drafted to limit the spouse’s right to receive capital.
For example, the trust can direct that capital only be paid to the spouse for their medical and health needs or other emergency needs. It can contain a cap on how much capital can be paid each year, or that certain assets in the trust — say a family cottage — should not be sold while held in the trust.
2. Insurance policies and registered plans
Designating beneficiaries for insurance policies, RRSPs, TFSAs and the like creates two distinct asset pools. The proceeds can remain separate from estate funds and be accessed quickly upon the deceased’s death without the need for a probated will.
The entitlement of the designated beneficiary is typically not contingent on estate debts, liabilities or the terms of the will. So, there is generally clarity on the amount that the designated beneficiary will inherit.
Probate fees are not payable on such proceeds because they pass outside the estate if there is a designated beneficiary.
3. Choose executors and trustees with care
Naming the spouse and children jointly can stall the administration if relationships are strained.
A common strategy is to appoint a neutral party or professional executor and trustee who can act objectively, follow established reporting practices and reduce distrust and conflict.
4. Clear communication
Even well-designed estate plans can fail due to misunderstandings or unmet expectations.
Family meetings facilitated by a neutral party can be helpful, especially when tensions exist. Conversations should be ongoing as family circumstances evolve.
Letters of wishes are also valuable, offering beneficiaries context behind the estate plan. They remain private, unlike a will which becomes part of the public record once submitted to the court for a grant of probate.
Estate planning for blended families requires strategy, clarity and often creativity. Estate lawyers play a critical role in helping clients understand the risks and design estate plans that protect both the surviving spouse and children from prior relationships.
Start these conversations early — they can prevent disputes later and secure peace of mind for the entire family.
This article is based on a presentation delivered by Namratha Sankar at the National Estates & Legacies Summit.