Introduction

Typically, separated spouses do not intend to benefit their previous partner if they pass. Unless the separation agreement includes a requirement to maintain designations to secure support obligations, most separated spouses prefer the freedom to choose who to designate their life insurance policy to. If the parties intend to not have the remaining spouse still be the beneficiary of the life insurance policy, they must use specific language that is clear and direct to revoke a predated beneficiary designation or to release a claim to such assets. General release clauses will not bar the party from claiming beneficiary status. Case law shows that a life insurance policy will usually trump a separation agreement, even with mutual releases and renounced rights.

Presumption of Non-Revocation

In Richardson Estate v Mew, the court states that “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.” This showcases the presumption of non-revocation; when a couple separates but does not yet divorce, gifts left to the separated spouse in a will are not automatically revoked.

There is an exception to the presumption laid out in Richardson Estate, as demonstrated in the Martindale case. Here, the court states that it would be a breach of the separation agreement, and against the good conscience of the appellant, to keep the proceeds from the policy if they have surrendered any right they may have had to the property of the deceased.

Legal Test for Revoking a Beneficiary

The test for determining if a beneficiary designation can be revoked is derived from sections 51(1) and 52(1) of the Succession Law Reform Act:

  • 51(1): A participant may designate a person to receive a benefit payable under a plan on the participant’s death,
    • (a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction; or
    • (b) by will, and may revoke the designation by either of those methods.
  • 52(1): A revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically.

Therefore, a beneficiary can be revoked by an instrument signed by the testator or by an individual on their behalf in their presence or by their direction or by will, and the revocation must expressly relate to the designation. In the case of domestic contracts and separation agreements, it must be clear and in accordance with section 52(1) for the agreement or contract to revoke a beneficiary.

Supporting Case Law

The case law supporting the estate’s position that the estate is the beneficiary of the proceeds of the life insurance policy is highlighted below:

  • In Eccleston Estate v Eccleston, a New Brunswick case, it was discussed how domestic contracts can revoke a beneficiary if the following elements are met:
    • Section 15(c) and section 17 of the Wills and Estates Act lay out the test for revoking a beneficiary. These sections state that a will or part of a will is revoked only by:
      • (b) another will made in accordance with the provisions of this Act,
      • (c) a writing declaring an intention to revoke and made in accordance with the provisions of this Act governing making of a will, or
      • (d) burning, tearing or otherwise destroying it.
    • Section 17 clarifies that a “will is not by presumption of an intention to revoke it on the grounds of a change in circumstances.”

Therefore, in New Brunswick, a beneficiary will be revoked if these conditions are met. This supports the estate in situations where there was a document in writing declaring an intention to revoke the husband as a beneficiary to the policy. A declaration must also satisfy the requirements stipulated in the Insurance Act to be considered as such. The concept that a declaration of writing demonstrates an intention to revoke was also explored in Martindale Estate.

In Martindale, it was questioned if there was any evidence that the deceased intended to change the designated beneficiary apart from the separation agreement itself. It is relevant if the court finds the intention of the deceased to be ‘unequivocal and clear’ for the existing designated beneficiary to be revoked, and that all necessary steps had been taken. Several witnesses also testified that this was true, aiding the estate’s case. This was supported by the decision in Gaudio, in which the language cannot be uncertain and ambiguous and must be clear to demonstrate an intention to revoke beneficiary status.

In many cases, it is considered if the deceased intended for the beneficiary to be revoked. Releases are to be construed according to the rules of written contracts, such as the cardinal rule that the intention of the party must be determined from the whole agreement considered in light of the surrounding circumstances. Therefore, the intention of the deceased party plays a role in determination. It must also be considered if the deceased’s will was updated following the separation to reflect the intention not to have the other party receive the proceeds from the policy. This reflects section 51(1)(b) as the beneficiary can be revoked by will. If the will was updated, this will lead to success in the estate being the beneficiary of the proceeds from the policy.

In terms of what documents count as a declaration of an intention to revoke, Love v Love held that an email could demonstrate a declaration to change a beneficiary under the Saskatchewan Insurance Act, but if there is no reference to the direct policy in an email or in the separation agreement, it will remain in effect. Therefore, the court should consider if there was any correspondence between the deceased party and their lawyer discussing the separation agreement or if there were any communications about the revocation of designation. This would aid in reflecting the deceased’s intentions.

In Goldfield, it was highlighted that clear language in a separation agreement is required to preclude a separated spouse from claiming a benefit under their will. Therefore, to advance the estate’s position when drafting a separation agreement, the parties must use very clear language that expressly states their revocation. This is usually the point of contention. Many cases consider the language of a separation agreement and if it was clear enough to trump the provisions of a will. In many of these cases, the language requirement was not met. Therefore, when one spouse is named as a beneficiary, even if the parties later separate and enter into a separation agreement with release provisions, and one party dies without making a new will, the court will still permit the separated party to make a claim as a beneficiary despite release provisions in a separation agreement.

In a recent case, it was stated that the legal test for revoking a beneficiary would be twofold: (1) if the designation is a “testamentary disposition,” and (2) if so, does the general revocation clause “expressly” relate to this designation? This test highlights what previous case law expresses but in a more clear and concise test.

A separation agreement usually will not be deemed sufficient to bar a party from claiming benefits under the other party’s will despite release provisions. However, this is contradicted by Burgess, where there was an intention found to revoke the designated beneficiary. On appeal, it was decided that the separation agreement effectively revoked the earlier beneficiary designation. However, this must be very clear language with a clear intention to revoke status. If the language is not clear enough, even if the parties are in minutes of settlement agreeing to a decree of absolute divorce, which would subsequently release each other from claims, the surviving separated spouse will still be deemed the beneficiary. Additionally, if the separation agreement has release provisions, it will not trump the will if the testator has a number of means available to revoke the gift made prior to separation. This demonstrates the importance of being clear with language so that the release provisions are upheld by the court, which seems to be a rarity.

Conclusion

– Separation agreements alone often aren’t enough to revoke a beneficiary designation.
– Courts need clear, explicit language in legal documents to support the revocation of a beneficiary status.
– The intention of the deceased, as reflected in updated wills or clear separation agreements, plays a significant role in these decisions.