Life insurance as security for children and spousal support has some flaws
From AdvocateDaily this week:
A recent Ontario Court of Appeal (OCA) ruling that allows a second wife and child to claim support from a deceased common-law husband’s life insurance policy raises some important questions and issues, says Ottawa family and estate lawyer Timothy N. Sullivan.
The ruling overturned a Divisional Court decision that found the second wife was not a “creditor” and therefore had no security interest in the policy.
Now the first wife and children, who were irrevocable beneficiaries, are still entitled to receive support from the $1-million policy, with the second wife receiving the remaining proceeds.
Sullivan, principal of SullivanLaw, says the issue has been in the spotlight because if a payor with a life insurance policy dies intestate, or revokes the beneficiary, the support recipients are out of luck since the insurance company isn’t a party to the separation agreement.
“If there’s no money available, then too bad, so sad,” Sullivan tells AdvocateDaily.com.
“It is a challenge for family lawyers to assure clients in the event somebody dies who is paying support doesn’t name you as an irrevocable beneficiary. So we provide things in the agreements such as requiring the payor to prove the recipient is a designated beneficiary, or if there’s a lapse in premiums, the recipient can pay those premiums and be reimbursed.”
Sullivan says he questions the result of the recent OCA case because it is not clear if they were common-law spouses by Ontario law. According to the decision, they were living in different countries and visited often. The woman became pregnant in the final months of the man’s life.
“Is she a dependent? It was a very short-term relationship,” Sullivan says. “I had a case where a couple had a child together but didn’t live together so there’s no spousal support entitlement. You have to cohabit.”
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