Your ex and you had joint life insurance when you were together. Don’t be surprised if your life insurance policy still has legal effect after you separate or divorce. Here are four things to know about life insurance after the love dies.
1. Separation agreements are legal contracts. You’re bound if yours contains a life insurance policy.
2. Your estate is liable for child support and spousal support after you’re gone (Ontario Family Law Act). Life insurance ensures support continues after your death.
3. Ontario courts can order a spouse or partner to make their ex or children life insurance beneficiaries. The order can’t be revoked.
4. Minor children must ask the court for insurance money. Appointing a trustee prevents delays and extra expense.
How Marital Breakdown Affects Life Insurance
Financial obligations for spousal support or child custody go on long after the honeymoon is over. Life insurance can be part of that separation agreement or divorce settlement. North Bay lawyer Michael Birnie’s estate is proof of that.
Two Wives and a Life Insurance Policy
Birnie died in 2017 at 61. He left behind two wives and a 2004 separation agreement promising a $500,000 irrevocable life insurance policy to the first, Janice. But Birnie never bought the policy. When he died, Janice sued the estate to collect the cash and $76,268.83 in cost of living adjustments. His second wife was forced to put money in trust pending the outcome.
Life Insurance for Spousal Support
As estate trustee, Birnie’s new wife claimed the policy was merely security for spousal support — it was included under the spousal support heading in the separation agreement. The agreement also suggested Birnie had to maintain the policy as long as he paid support. As Janice was now independent, her husband’s estate had a right to end her spousal support expectations, she argued. That would let the estate off the hook for the $500,000.
Stand Alone Insurance Clause, Not Support
Janice disagreed with his estate trustee wife’s take. She told an Ontario court the contract was just a financial benefit, independent of her monthly spousal support. Since amounts payable under life insurance policies are part of a deceased’s estate in Ontario. she should receive the full $500,000. The court agreed that Birnie had made a contract and she was owed the money.
Winning a Stand-alone Insurance Case
Janice won her case because her separation agreement didn’t link the life insurance policy to her spousal support. It also didn’t call for the policy to be altered if or when Janice became financially independent. That made the policy stand-alone, not subject to the claw back his estate trustee had claimed. The fact the policy was irrevocable meant it wasn’t subject to changes or lawsuits.
Paying for Life Insurance
Having life insurance can be mandatory in Ontario if your ex pays child support or supports you after separation or divorce. It’s a good idea to give the life insurer your contact information and ask that they tell you if your ex falls behind on paying the premiums. You may be able to bring the premiums up to date and keep the policy alive. At the very least, you can go to court and ask that your ex be required to make the payments.
Reduce Life Insurance As Time Goes By
Spousal support can be time limited. No one (except maybe your ex) wants you to keep paying for life insurance after financial help is no longer needed. Make sure you reduce the amount of life insurance in your separation agreement or spousal support order as time goes by. When your family obligations end, you can stop the policy or make a new partner the beneficiary.
Rearranging Life Insurance After Remarriage
A divorced Ontario father who died of cancer a month before a new child was born wound up in court posthumously. Two weeks before he died, Stephen Cameron changed the beneficiaries to share his life insurance policy between his first and second wives and all his children. His first wife got a court order reversing the decision by arguing the policy was irrevocable. A court sided with his new wife that he had meant to provide for both families.
Watch Out for Cash Surrender Clauses
Expect your ex might try to cash the life insurance policy? You could strike out if a life insurance policy has a cash surrender clause that allows your former partner to borrow against it. By the time your spouse passes away, the policy may be worthless. Add a clause to your separation agreement or spousal support order that prohibits the policy from being used as an asset. Tying up the details takes time, but it’s well worth it in the end.
Find an Ontario Family Lawyer for Your Life Insurance Questions
When you have legal questions about your ex’s life insurance, ask an Axess Law Ontario family lawyer. We can video conference live with you anywhere in Ontario, at times that suit your schedule. Call toll-free to 1-877-522-9377 or in Greater Toronto at 647-479-0118 or use our online booking form to book an appointment. Meet in person with a licensed family lawyer at our Ottawa, Toronto, Scarborough, Vaughan, Etobicoke, Mississauga Winston Churchill or Mississauga Heartland law offices.
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