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Inheritance Laws for Separated but Not Divorced Couples in British Columbia


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  • Inheritance Laws for Separated but Not Divorced Couples in British Columbia

When going through a separation, spouses must divide property accumulated during their marriage. It can be challenging to sort through property rights and determine who is entitled to what. It gets even more challenging when inheritance issues arise after separation but before divorce.

Our knowledgeable family law lawyers and estate law lawyers can provide you with valuable insight on how to protect an inheritance received before or during marriage and how your inheritance rights can be affected during a divorce in British Columbia. If you have questions about your inheritance rights or want to discuss options for protecting yourself and your property in the transitional period after separation but before divorce, reach out to Onyx Law Group’s experienced family and estate lawyers for guidance.

For those who are separated but not divorced, inheritance rights and property rights can combine to provide surprising results. In today’s blog post, we’ll discuss the intricacies of the law and some of the issues you should consider when going through separation or divorce.

Issue #1: How Does Inheritance Get Split in Divorce?

Issue #1: How Does Inheritance Get Split in Divorce?

Equal Division of Net Family Property

The general rule in British Columbia is that property and joint debt are subject to 50/50 division between spouses unless it is significantly unfair to do so. Property is classified into two categories for family law purposes: family property and excluded property.

Under the Family Law Act, inheritance money received by one spouse is generally classified as excluded property, which means it’s not shared in the event of separation or divorce. However, any increase in the value of the inheritance during the course of the marriage is family property subject to equal division.

Agreements to Safeguard Inheritance

Marriage agreements such as prenuptial (before marriage) and postnuptial (after marriage) can be prepared to protect your inheritance. Even if you already have a prenuptial or postnuptial agreement in place, it’s important to maintain a clear distinction between inherited assets and marital assets. The excluded character of an inheritance can be lost if the inherited money or asset is gifted to the other spouse, mixed with family property, or used to purchase property in joint names.

Proving Inherited Money or Assets Should Not Be Split

The spouse claiming that an inheritance is excluded property is responsible for proving that the property is excluded property. The Family Law Act was recently amended to include a provision (section 85(3)) that may make it easier for a separating spouse to argue that inherited money or property remains excluded even if legal or beneficial ownership was transferred from that spouse to the other spouse.

Section 85(3) is new, so you should continue to be very cautious when it comes to transferring inherited property or money to your spouse or using your inheritance to purchase property in joint names. Your safest bet is to consult with a family lawyer if you anticipate receiving an inheritance or want to know how to protect an inheritance you’ve already received.

Issue #2: What Happens to Our Wills When We Separate?

Issue #2: What Happens to Our Wills When We Separate?

It’s very common for spouses to leave their estates to each other in their Wills. It’s also very common for spouses to want to change their existing Wills after separation. What many separated couples don’t know is that the Wills, Estates and Succession Act may help them out in this regard.

When married spouses or common-law spouses cease to be spouses, s. 56(2) of the Wills, Estates and Succession Act automatically revokes testamentary gifts to one’s former spouse. The effect of s. 56(2) is that an ex-spouse is disinherited. The other effect of s. 56(2) is that the appointment of your former spouse as estate trustee or your executor in your Will is revoked.

What if you want your ex-spouse to continue to inherit from your estate after separation? Or, what if you still want your ex-spouse to be your estate trustee? The best course of action is to reach out to a wills and estate planning lawyer to execute a new Will or a codicil affirming your testamentary intentions.

If such formal steps aren’t taken and one of the spouses dies, the surviving spouse who was accidentally disinherited by operation of s. 56(2) may still have recourse: WESA s. 58 gives BC judges discretion to make a court order reviving the gifts in an existing Will. There has to be clear evidence of the deceased spouse’s intention that their former spouse inherits despite the separation (see here the case of Jacobson Estate (Re), 2020 BCSC 1280 where the ex-spouse succeeded in making that argument).

Issue #3: What Happens to Beneficiary Designations After Separation?

Issue #3: What Happens to Beneficiary Designations After Separation?

Life insurance policies, pensions, and certain types of investments allow for beneficiary designations. Unlike gifts in an existing Will, beneficiary designations in life insurance policies, pensions, and investments are not automatically revoked when spouses separate. It’s highly recommended that you review all such beneficiary designations after separation to ensure they are in line with your current wishes. Failure to update a beneficiary designation after a separation or divorce may leave grieving loved ones in for an unpleasant surprise.

For example, in the case of Knowles v. LeBlanc, 2021 BCSC 482, a long-term common-law spouse received quite a shock when she found out that her partner had never changed his beneficiary designations. His $100,000 life insurance policy proceeds went to his first wife, whom he had been divorced from for 30 years. His surviving common-law spouse was forced to take legal action. She succeeded in obtaining a court order imposing a constructive trust over the insurance proceeds—but she had strong evidence to prove what her deceased common-law spouse intended, and she was able to rely on unjust enrichment principles to support her claim.

Issue #4: What Happens to a Family Law Claim if One Spouse Dies?

Issue #4: What Happens to a Family Law Claim if One Spouse Dies?

As discussed above, BC’s Family Law Act states that, upon separation, each spouse has a right to an undivided half interest in all family property and is equally responsible for family debt. What happens if a spouse dies after separation but before family property issues have been settled? Does the right to make a claim for division of family property die with them?

The answer is no. Certain types of claims can be annulled by reason of a person’s death, but BC law clearly preserves causes of action for property division notwithstanding the death of one or both separated spouses. Section 150(2) of WESA clearly states that it is not necessary that the claim has already been commenced in order to survive death. Furthermore, and s. 3 of the FLA allows former spouses to bring claims under the FLA for family property division. So, even if you haven’t yet started your family law claim when your spouse dies, you can still bring the claim against their estate within 2 years of the separation for common law spouses, and no limitation period for married spouses. Conversely, if you die, your separated spouse can make the same claims against your estate.

Issue #5: What Happens to Jointly Owned Property if One Spouse Dies Post-Separation?

Issue #5: What Happens to Jointly Owned Property if One Spouse Dies Post-Separation?

Joint assets pass outside of an estate to the surviving joint owner. However, in BC, the effect of separation is to automatically convert joint ownership of property to tenancy in common. Let’s look at an example to show how the law works for still-married spouses: you and your spouse purchase property and hold title as joint tenants; if one of you dies while you’re still together, title to the property passes to the surviving spouse because of the right of survivorship.

However, on separation, joint ownership is automatically severed such that each spouse has a right to an undivided half interest in all family property as a tenant in common and is equally responsible for family debt. This is by operation of s.81(b) of the Family Law Act. So, if one spouse dies after separation but before property division has been resolved by way of a court order or valid separation agreement, the jointly held property does not automatically pass to the surviving (but separated) spouse. Instead, the deceased spouse’s half interest in that property forms part of their estate, to be disbursed according to that spouse’s Will.

Issue #6: What Happens if My Separated Spouse Dies Without a Will?

Issue #6: What Happens if My Separated Spouse Dies Without a Will?

If one spouse dies after separation but before property division has been resolved by way of a court order or separation agreement, can the surviving spouse make a claim for a share of the deceased spouse’s estate under the rules of intestate succession? The answer is no.

The definition of “spouse” in WESA includes people who are married to each other and people who have lived with each other in a marriage-like relationship for at least 2 years at the relevant time (see WESA s. 2). If you have separated from your married spouse or terminated your common-law relationship when your spouse dies, you no longer meet the definition of a spouse in this context, and therefore lose the right to inherit from the intestate estate. (Note, however, that you continue to have the right to bring a family law claim for the division of assets and debt, as discussed above).

Protect Yourself and Your Inheritance Rights After Separation

There are a lot of unknowns during the transition from being married, to separated to divorced. A skilled lawyer can guide you through the transition, ensuring you and your assets are protected. Our team of family lawyers and wills and estate lawyers are uniquely positioned to advise you on your legal rights and options. Contact Onyx Law Group today for trusted legal advice and customized solutions.

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