Earl v. McAllister: Clarifying the legal test for a dependent's estate entitlement

The Estateably Team

Case Facts

Leo McAllister (Leo) passed away in 2017 at the age of 48. He was survived by his wife, Barbara McAllister, who served as the respondent in the application. Tammy Earl, Leo's wife from a prior marriage, acted as the applicant for her two sons, whom Leo fathered— Cameron and Blake. At Leo's death, Cameron was eleven years of age and Blake was nine years of age.

Leo and the respondent were married two years before Leo's death in 2015. Leo was 46 and Barbara was 57 at the time. They jointly owned a house, and Leo made approximately $85,000 per year while Barbara made approximately $100,000 per year. 

At death, Leo's estate liabilities exceeded its assets. Although he had two pensions and a life insurance policy, the benefits skipped the estate administration process and went directly to the respondent. 

Pensions, life insurance, and RRSP

Leo had two pensions through his union in his career as a glazier. The first (Pension One) was from his Ontario union. The death benefit provided $126,950.78 with a further deferred amount of $14,748.48. Before his death, Leo signed consents to transfer the designated beneficiary from the respondent to his two sons. However, the pension administrators never received these papers and never processed the transfer. 

The second (Pension Two) was administered in the United States and provided a pre-retirement surviving spouse benefit that the respondent could receive in a lump sum of $88,117.40. Leo lastly had a $100,000 life insurance policy designated to the respondent and a $1,244.55 RRSP assigned to his two sons. 

The living conditions of the boys

The boys lived with the applicant in a basement apartment. The applicant had a foggy financial situation with no recorded employment since 2014. Her income consisted of social assistance, CPP survivor's pension, and various tax credits. These incomes amounted to approximately $32,000 per year, which was less than her annual expenditures. The applicant's father provided her with loans to partially make up the difference. 

Prior decision with the application judge 

The prior application judge added one of the pensions and the life insurance policy to the estate. The sum of the estate would then be $167,062.52, with one-half going to the boys and the other half to the respondent. 

The applicant argued that the judge erred in law. The application judge should have included both pensions in the valuation of the estate, instead. Additionally, according to s.72 of the Succession Law Reform Act (SLRA), the total amount should go to the two boys. 

At the Ontario Superior Court of Justice

Inclusion of Pension Two 

The surviving spouse benefit of Pension Two conforms with s.48 of the Pensions Benefits Act. However, the applicant argued that s.72(1)(g) of the SLRA provides that a pension plan with a beneficiary designation should be included in the deceased's net estate. The application judge relied on Smallman v. Smallman Estate (1991) to find that the pension's survivor benefit was not due to a designation but due to marital status. The judge at the ONSC agreed with this. Thus, Leo's estate excluded Pension Two. 

Adequacy of support to the two sons

S.58 of the SLRA notes that where a deceased does not make adequate provisions for their dependents, the court on an application can order adequate provisions. S.62 requires the court to consider all circumstances and includes a list of non-exhaustive factors. Quinn v. Carrigan lays out an analysis for this consideration:

  • Identify dependents with a claim;
  • Value those claims based on factors set out in legislation and legal and moral obligations of the estate;
  • Identify non-dependent persons who have a legal or moral claim to the estate;
  • Balance competing claims by considering the size of the estate, the strength of claims, and the deceased's intentions. 

The ONSC found that the application judge erred by not considering all the relevant factors. This included the need for a stable environment for the boys and that they lived off social assistance. In contrast, the respondent was left with a house and had earned more than Leo before his death. 

Furthermore, the ONSC found that the application judge incorrectly characterized loans from the applicant's father as "gifts". The ONSC also stated that considering social benefits when valuing the boy's claims to the estate, as the application judge did, ran contrary to s.61(1)(s). These considerations developed the application's judge's improper conclusion. 

In Madore-Ogilvie v. Ogilvie Estate, the Court found that where there were insufficient assets to provide for the deceased's dependents, the application judge can choose to use limited assets to only benefit the minor dependents. Thus, the ONSC concluded that 100% of the net estate's asset should go to the boys. 

Conclusion

Earl v. McAllister provides additional clarity to determining whether a dependent is entitled to estate proceeds. Specifically, this case reinforces an application judge's inability to consider social benefits when choosing a claim to estate proceeds. It also reiterates the operations of a surviving spouse benefit from a pension in the context of estate litigation.

The Estateably Team
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