Life, Insurance and Spousal Support

A divorcing couple was ordered to share the cost of a life insurance policy when the husband pled he had fallen on hard times. His ex-wife found it hard to believe. The court liked her version of events way better.

Life Insurance Secured Spousal Support

When “Fergus'” and “Jackie’s” (not their real names) 28-year marriage ended in 2004, they had three adult children. Their divorce, finalized three years later, included spousal support of $8,711 monthly and a $500,000 life insurance policy. The policy was security in case Fergus died early, as was entirely possible.

Newly Retired, Newly in Debt

By 2017, Fergus was 67 and newly retired, but in poor health. His prognosis was grim, court was told. He testified he was unable to work or pay spousal support and especially not a recent huge premium hike for the life insurance policy. Fergus asked to have his ex-wife’s spousal support ended and his arrears set aside.

Ex-Wife Wonders Where the Money Went

Jackie, 66, and with a new partner herself, didn’t doubt her ex was suffering physically. But, as she pointed out, he had sold an apartment building for just over $1 million two years earlier. Fergus had also taken the liberty of reducing his spousal support payments by half in 2018, without the court’s consent. He said it was because he was transitioning to retirement and his income had been reduced by 50 per cent. She filed a complaint with the Ontario Family Responsibility Office (FRO) for the outstanding amount.

Family Home Sold to Partner for $1

Jackie argued her spousal support and the insurance policy were linked. If Fergus died, the policy would pay her what she would have received as spousal support. But that wasn’t all. Fergus had transferred his family home to his common law partner for just $1, four months after the FRO took out a writ against it for the missing support payments. 

How Tax Bills Affect Spousal Debts

Fergus’ financial woes continued to mount. He owed capital gains tax of $316,000 on the sale of the apartment building. Premiums for the $500,000 life insurance policy had gone up by over $350 a month to $603.92. And the FRO had successfully frozen his bank account, freeing up $123,202 he owed Jackie. That still fell $34,900 short of his spousal support arrears.

Calculating Ex-spouse’s Financials

Despite all of that, Jackie and the judge were skeptical about Fergus’ true financial picture. As far as Ontario family court was concerned, Fergus had all the resources he needed to both pay his arrears and fund the life insurance policy. Certainly he had transferred his home mortgage free to his common law partner. But his remaining banks accounts, RRSPs and a lake property were worth over $211,000. Fergus had “made no effort”, the judge wrote, to explain where the $1 million from the apartment building had gone, nor had paid the taxman.

Health Affects Life Insurance Eligibility

The court, and Jackie, had every expectation that Fergus’ health would continue to decline. The likelihood he would be approved for a new insurance policy was slim. Allowing the current policy to expire would be hazardous. It didn’t matter that Jackie was first in line among his creditors and heirs if he died without renewing the policy. Fergus’ remaining estate couldn’t come near the $500,000 the policy would pay out if he died.

Protecting Spousal Support Rights

Since the premium had skyrocketed, the judge ordered Fergus and Jackie to share it. He rejected Fergus’ complaint that he was too sick to take care of his spousal support obligations. Fergus had, after all, communicated with his life insurance broker and arranged to transfer his home to his partner. He had known for some time the life insurance policy was due for renewal and failed to notify Jackie until he filed the court motion cancel it, the judge remarked.

Court Approval Needed to Vary Spousal Support

Fergus had acted on his own to change his spousal support. That cost him in court. The judge found that by the time he arrived in court to try to end the support payments, Fergus no longer had “clean hands.” His financial statements suggested a different story from the one he told. Not only could Jackie’s ex afford to pay arrears, but the $1 million was unaccounted for. As the judge wrote, it was unclear why Fergus had transferred his home to his partner for a measly $1 when he was almost $80,000 in arrears.

Options for Changing Spousal Support 

Had Fergus gone to family court, he might have gotten an order to stay, vary or suspend the support payments. The court might also have excused him from making amends on part or all of the arrears, especially in his condition. Instead, although his lawyer argued the FRO’s enforcement proceedings would add to Fergus’ “mental anguish”, the judge was unsympathetic. Jackie had already asked the FRO to unfreeze his bank account to relieve Fergus’ financial plight. Anything more was unnecessary. It was a case of too little, too late for Jackie’s ex.

Apply to Court to Vary Spousal Support

Axess Law’s Ontario family lawyers help you make a family court application to vary spousal support when your finances change. Our licensed lawyers can consult with you anywhere in Ontario via online video call 7 days a week, day or evening. Dial 1-877-522-9377 or in Greater Toronto 647-479-0118 or use our online booking form to make an appointment. Meet in person with a family lawyer at our Ottawa, Toronto, Scarborough, Vaughan, Etobicoke, Mississauga Winston Churchill or Mississauga Heartland law offices.

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Photo by Peggy und Marco Lachmann-Anke|Pixabay.