If there is an agreement or an obligation to pay spousal maintenance or child maintenance in either a court order or a separation agreement it is important to consider how to provide security for the maintenance payments if the payor spouse dies.
There are two methods which are usually considered. The first is to add a provision to the separation agreement or the court order that the spousal maintenance and/or child maintenance obligation is binding on the estate of the payor. The problem with this is that the payor may arrange his or her affairs so that he or she dies without an estate which is large enough to sustain the required payments.
A preferable approach is to ensure that the payor spouse obtains and maintains sufficient life insurance to secure the monthly payments for the anticipated amount of time. Typical clauses which can be used are as follows:
- For so long as child or spousal maintenance is payable for the children of the marriage, the Husband shall designate the Wife as the irrevocable beneficiary of his life insurance with ________.
- The Husband shall provide such evidence as the Wife may reasonably request with regard to the status of the life insurance policy described in paragraph 1 above.
- So long as the Wife is entitled to be the beneficiary of the said policy, the Husband will maintain the policy and pay the premiums thereon and shall not borrow against the policy. If the Husband defaults, the Wife will be entitled to make the payments and be reimbursed by the Husband.
- The Husband hereby authorizes and directs the insurer to release to the Wife such information as she may request from time to time concerning the said policy.
- When child maintenance and spousal maintenance are no longer payable for the children of the marriage, the Wife shall sign such consents as are necessary to enable him to deal with his own policy.
- When the Spouses sign this Agreement, the Husband will establish an insurance trust for the Children’s benefit naming _______ as trustee (the “Trustee”).
- The Husband will designate the Trustee as the irrevocable beneficiary of the insurance policy available to the Husband through his employment (the “Policy”) on behalf of the children.
- The insurance trust will include the following provisions:
- the Trustee will pay to the guardian of the child an amount of child maintenance each month which is the average of the amount of child maintenance paid by the Husband in the three years previous to his death plus an increase each year in accordance with the indexing factor for the month of November of the previous year such indexing factor being the percentage change in the Consumer Price Index for Canada for prices of all items since the same month of the previous year, as published by Statistics Canada, plus the special expenses as set out in this Agreement and any private school fees and expenses, for so long as child maintenance is payable pursuant to this Agreement from the insurance fund;
- when child maintenance is no longer payable by the Husband, the corpus of the insurance trust shall be paid by the Trustee to ________Within 30 days after the Spouses sign this Agreement, the Husband will satisfy the Wife that the designation of beneficiary on his insurance has been changed as set out in this clause.
- Within 30 days after the Spouses sign this Agreement, the Husband will satisfy the Wife that the designation of beneficiary on his insurance has been changed as set out in this clause.
- The Husband will give the Wife an executed copy of the insurance trust document.
- The Husband will maintain the Policy.
- The Husband will not use the Policy as security for any indebtedness.
- The Husband shall from time to time provide such evidence as the Wife may reasonably require that the Policy remains in effect and if the Husband should default in payment of the insurance premium, the Wife shall be entitled to pay the premiums and be indemnified by the Husband.
- The Wife shall have the right to contact the Husband’s life insurance company directly to obtain information about his Policy.