Life Insurance Beneficiary Designation After Separation
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 […]
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