Situations arise where a party in ongoing family law litigation passes away before a final order is obtained from the court, or where separated spouses are negotiating their property rights and one of them passes away before a final agreement can be reached. In cases where there is ongoing litigation, the litigation can continue with the deceased’s estate replacing the deceased spouse as a party. Where the separated spouses were involved in negotiation, it may be necessary to take particular steps to protect the surviving spouse’s rights.
Any separated spouse facing a situation where the other spouse passes away before a final resolution should seek legal advice as there are important timelines and decisions to be made promptly. Any Estate Trustee for an estate where there is a former or surviving spouse, and any minor or adult child, should also obtain legal advice in order to determine her potential obligations to those other interested parties.
For example, if a husband passes away, the surviving wife’s ongoing claim for an equalization of net family property against the husband personally can be converted into a claim for an equalization of net family property against the husband’s estate. Section 7(2) of the Family Law Act permits the continuation of any application for an equalization of net family property commenced during the joint lives of the spouses. If the marriage ends in the death of one spouse, then section 7(2) also permits the commencement of an application for an equalization made either by or against the deceased spouse’s estate.
It is not uncommon for the equalization not to have been finally resolved if there was an ongoing family law matter, either in litigation or negotiation. Sometimes this issue is straightforward, and a matter of appropriate disclosure being provided so that the spouses’ net family properties can be determined and equalized. However there are many issues that can make the determination of an equalization payment more complex, including cases where for example a deceased spouse might have owned their own business, the value of which is an issue of significant debate.
As in family law matters, the ultimate determination of the equalization payment may be arrived at by way of consent between the parties, or by way of court order if the parties cannot agree.
A surviving spouse in this situation may also find herself in a position where her equalization claim competes with other claims against the estate. In complex families, there may be minor children from an earlier relationship, the surviving second wife going through the family law litigation at the time of the husband’s death, and potential claims from creditors that have not yet been determined. It will be important for the Estate Trustee to obtain legal advice, and potentially the direction of the Court, specifically to address the issue of which obligation will take priority.
An Estate Trustee in this situation should obtain legal advice prior to making any interim disbursement.