The breakdown of a marriage is seldom a pleasant or simple process to work through. One potentially problematic aspect of this is how to deal with the revocation of life insurance and RRSP/RRIF/pension beneficiary designations. Despite expressed intentions and commitments in a separation agreement, additional positive steps may be necessary to give effect to a purported change.
Here is a recent trial court decision where an ex-spouse remained on record as life insurance beneficiary, and a couple of appeal court decisions that provide further context.
Love v. Love, 2011 SKQB 176
The separation agreement made reference to the husband’s pension, but made no mention of the group life insurance on which the wife was the named beneficiary. Following separation, the husband sent an email to his employer’s human resource department requesting the necessary paper work “to change the beneficiary on my pension etc. (from my former wife to my son).” After his death, the incomplete form was found in his files.
The court held that an email could suffice as a “declaration” to change a beneficiary under the Saskatchewan Insurance Act. On the facts however, neither the reference to the policy (“etc.”) nor the new beneficiary were sufficiently clear, particularly as there were actually three sons.
Richardson Estate v. Mew, 2009 ONCA 403
The Ontario Court of Appeal provides a useful summary of cases involving the interaction of separation agreements and beneficiary designations, and enunciates some principles for analyzing the cases:
“A former spouse is entitled to proceeds of a life insurance policy if his or her designation as beneficiary has not changed. This result follows even where there is a separation agreement in which the parties exchange mutual releases and renounce all rights and claims in the other’s estate. General expressions of the sort contained in releases do not deprive a beneficiary of rights under an insurance policy because loss of status as a beneficiary is accomplished only by compliance with the legislation. The general language used in waivers and releases does not amount to a declaration within the meaning of the Insurance Act.”
Martindale Estate v. Martindale, 1998 CanLII 4561 (BCCA)
The British Columbia Court of Appeal held that, on the facts in evidence, it would be a breach of the separation agreement for the ex-husband to claim insurance proceeds from the death of his ex-wife. Instead, he received the proceeds only as trustee of a constructive trust for the benefit of the intended beneficiaries.
In the words of the Court, “it would be against good conscience for the appellants to keep this money because Mr. Martindale had, by the separation agreement, surrendered any right he might have had to the property of the deceased.”
- Separating spouses and their lawyers should be sure to direct their minds and their drafting to explicitly address life insurance and RRSP/RRIF/pension beneficiaries in the separation agreement.
- The Martindale result should be viewed as the exception to the general approach expressed in the Richardson case. To achieve greater certainty, separated spouses should change beneficiaries using each respective institution’s forms and procedures.