It is a common term of a separation agreement that one or both spouses will designate each other as the irrevocable beneficiaries of their life insurance policies. This is usually done to provide the surviving spouse with sufficient funds to replace child maintenance and/or spousal maintenance payments which typically end because of the death of the payor.
In a recent decision made by the Ontario Court of Appeal Dagg v. Cameron Estate (2017) ONCA 366 the court was faced with a situation where a husband had agreed in his separation agreement to name his first wife as irrevocable beneficiary of his life insurance. He later remarried and had another child and he then changed his insurance to name his second wife and child as beneficiaries of part of his life insurance.
The Ontario Court of Appeal held that the second wife did have a claim to part of the insurance based on the Succession Law Reform Act (SLRA) in Ontario. The court awarded the first wife only enough of the life insurance to cover her loss of spousal maintenance and child maintenance and the balance of the insurance went to the second wife. This was clearly contrary to the terms of the separation agreement which the husband has signed.
This has not yet been tested in a court in B.C. and because estate legislation is different in each province there could be a different result. The general idea however is that life insurance left to a former spouse to secure child maintenance and/or spousal maintenance will be treated as a fund for the former spouse to draw on to replace payments but the former spouse may not be entitled to receive a windfall and may not be able to retain any excess funds from the insurance policy.
Deborah A. Todd