One of the more difficult situations that may arise in the administration of an estate is a claim by a former spouse of the deceased that support obligations set out in a separation agreement are binding on the estate. Unless the separation agreement states otherwise, support payments are not normally binding on an estate and cease upon the death of a payor. Ultimately, the administrator or executor may have to bring a court application to determine the issue and quantify the amount payable. However, it is useful to know when support obligations might be binding and how much of the estate will be impacted by such a finding.
The starting point in determining whether agreed support obligations are binding on an estate is the wording of the separation agreement itself. When reviewing the agreement, there are three aspects that a Court usually examines:
- Does the agreement specifically address what happens to support upon the death of the payor?
- Are there general clauses that have the effect of binding the estate?
- Are there additional surrounding circumstances that indicate that support should be binding on the estate?
With respect to spousal support, the Court has said that time-limited support terms are binding on the estate [Brubacher v. Brubacher Estate]. So, if there is a date upon which the last support payment is to be paid or the support is payable for a specific duration, and the payor dies before the last payment, the support obligation will be binding on the estate despite the lack of any specific clause in the separation agreement. Similarly, where a child support obligation is limited or defined, the support is binding on the estate [Terry v. Terry Estate; Wilson v. Wilson Estate]. For example, where child support is to continue for so long as the child is a “child of the marriage”, the Court has found that this language indicates an intention to make child support payable regardless of the payor’s death [Lesser v. Lessor].
The most complicated situations, which are surprisingly common, are where there are no specific terms that deal with support upon the payor’s death. A general enurement clause, such as “This Agreement benefits and binds the parties and their personal representatives and assigns” has been held to be sufficient to make the support provisions binding on the estate [Wilson v. Wilson Estate, Terry v. Terry Estate].
Assuming that the support provisions are binding on the estate, the next issue is to determine quantum. Historically, the Court determined quantum by reference to the needs of the recipient or the children as the case may be. However, since the implementation of the Child Support Guidelines and to a lesser extent, the Spousal Support Guidelines, the determination of support has shifted from a needs-based analysis to a payor’s income-based analysis. What will ultimately occur will depend in large part on the circumstances of all the parties involved. However, there are generally two options for the estate:
- Maintain sufficient funds in the estate to take care of the support obligations, make an interim disbursement to the beneficiaries of the funds not needed to pay the support obligation and pay out the balance of the estate and pass accounts once the support obligation terminates; or
- Fix the quantum of support as a lump sum amount and disburse the rest of the estate to the beneficiaries.
The first option has some appeal in that it provides some measure of certainty and leaves it open to the estate to bring applications to vary support as the recipient’s or children’s circumstances change. However, depending on the age of the child or the duration of support left to be paid, it may not be practical to do so as the administration of the estate cannot be finalized until the support payments end. If that approach is not acceptable to the other beneficiaries, the only viable approach may be to quantify the lump sum support to be paid from the estate. If the beneficiaries and the support recipient can reach an agreement, then the matter can conclude without much complication. However, if they cannot agree, then the administrator or executor must apply to Court for directions. In that case, the Court will have to decide support based on one or more of the following factors:
- the deceased’s income at the time he or she passed away;
- the income the estate could generate if all of the estate’s assets were invested; or
- hypothetical projected income of the deceased based on a number of variables including the deceased’s age and retirement expectations such as whether he or she was expected to retire during the period of time that support was payable.
Dealing with an estate against which a support recipient makes a claim can complicate the administration. The executor should generally play a neutral role but can assist the parties to try to reach a consensus to avoid diminishing the estate assets. If an application for direction is necessary, the executor should be informed as to the basic principles that apply in such circumstances, while leaving the affected parties to make the primary submissions on the support issues.
Parties negotiating support obligations under a separation agreement are strongly advised to obtain estate planning advice and input into the agreement, to minimize uncertainty and expense to the estate in the event the support payor dies prematurely.