Under Ontario’s Succession Law Reform Act (SLRA), a preferential share serves as a statutory entitlement that safeguards the financial interests of a surviving spouse when a deceased individual dies intestate (without a valid will). This legal provision ensures that the surviving spouse receives a predetermined portion of the estate before any residual distribution among other heirs. This entitlement aims to prevent financial hardship and uphold fair estate distribution. As a key public policy measure, the preferential share ensures that a surviving spouse is financially protected under intestacy laws. This safeguard prioritizes spousal security before distributing assets to other heirs, especially when the estate includes non-liquid assets like real property.

Statutory Preferential Share Entitlement

A surviving spouse’s claim to a preferential share arises only in intestacy scenarios and takes precedence over other claims to the estate. As of March 1, 2021, the preferential share in Ontario was revised to $350,000, an increase from the previous amount of $200,000. This legislative amendment reflects evolving economic conditions and aims to provide enhanced financial security to surviving spouses.

Application of Preferential Shares in Estate Distribution

The statutory framework governing preferential shares prescribes the following method of estate distribution in intestate circumstances:

1. Estate Valuation Below or Equal to the Preferential Share Threshold
   • If the total value of the estate does not exceed $350,000, the surviving spouse inherits the entire estate, thereby extinguishing any claims by other heirs.
2. Estate Valuation Exceeding the Preferential Share Threshold
   • The surviving spouse receives the first $350,000 of the estate.
   • The remainder of the estate is distributed as follows:
     • If the deceased had no children, the surviving spouse inherits the entire estate.
     • If the deceased had children, the residual estate is divided between the spouse and children, ensuring that the spouse receives at least 50% of the total estate.

Illustrative Scenarios

Scenario 1: Estate Valued Below the Preferential Share

John dies intestate, leaving an estate valued at $200,000. His surviving spouse, Mary, is the sole beneficiary under the preferential share provision, as the estate value is below the statutory threshold. Consequently, Mary inherits the full $200,000, with no distribution to other heirs.

Scenario 2: Estate Valued Above the Preferential Share

Sarah dies intestate, leaving a $500,000 estate, survived by her spouse, Mark, and two children. Under Ontario’s intestacy rules, Mark first receives the statutory preferential share of $350,000. The remaining $150,000 is then divided equally, with Mark receiving 50% ($75,000) and each child inheriting $37,500. As a result, Mark’s total inheritance amounts to $425,000, while each child receives $37,500.

Under Ontario’s intestacy laws, a separated spouse is still entitled to the preferential share unless a divorce is finalized. This means that without a valid will, your estranged spouse could inherit the preferential share, regardless of your wishes. To address this scenario, writing a will as soon as possible, if you are separated or divorcing, this ensures your estate goes to your intended beneficiaries and not to an estranged spouse.

While preferential shares provide statutory protection, intestacy laws may not reflect an individual’s true intentions. Without a valid will, estate distribution can become uncertain, potentially leading to disputes and legal challenges. Proper estate planning, including drafting or updating a will, ensures that assets are distributed according to your wishes and helps prevent conflicts among beneficiaries.

At Kormans LLP, our team of lawyers offer tailored estate planning solutions to safeguard your interests and ensure compliance with Ontario law. For professional guidance, contact us at info@kormans.ca or call (905) 270-6660.