Section 72 Assets, Dependant’s Support, and Personal Liability of Estate Trustees
A recent decision of the Ontario Superior Court of Justice considers life insurance as a Succession Law Reform Act (“SLRA”) s. 72 asset, and the circumstances in which a beneficiary or estate trustee will be ordered to make a support payment personally.
In Bormans v Estate of Bormans et al, 2016 ONSC 428, the Applicant (“Gabriele“), made a claim for dependant’s support under Part V of the SLRA. Gabriele had been married to John Bormans (the “Deceased”) for 38 years, until their divorce in 2010. They had two children together, Jessica and Amanda.
The court order granting Gabriele and the Deceased’s divorce provided for spousal support payments of $500 per month from the Deceased to Gabriele. At the time of the divorce, the Deceased made a warranty to Gabriele that she was the beneficiary of his group life insurance policy which secured his support payments on his death. This term was not included in the court order.
After the Deceased’s death in March 2014, Gabriele enquired of the Deceased’s group life insurance company and was advised that the employer had terminated that coverage. After making a claim in writing for support under the SLRA, Gabriele learned that Jessica had received $70,000 in insurance proceeds as the beneficiary of a separate insurance policy on the Deceased’s life. Jessica was also named as estate trustee in the Deceased’s Will.
Prior to being served with Gabriele’s application for dependant’s support, Jessica had spent a portion of the insurance proceeds. However, she continued to spend the proceeds after she had been served with Gabriele’s application, despite her obligation under s. 67(1) of the SLRA, not to make any distribution of the deceased’s estate.
Usually, if the beneficiary named in a life insurance policy is someone other than the estate, the proceeds pass outside of the estate. However, according to s. 72 of the SLRA, such assets can be deemed part of the estate for the purpose of ascertaining the value of the estate and for funding an order for support of dependants. Therefore, according to s. 72(1)(f) and (f.1), the court found that the life insurance proceeds paid to Jessica were to be deemed part of the Deceased’s estate.
The court found that Gabriele was a dependant of the Deceased under s. 57 of the SLRA and that Jessica was not a dependant. The quantum of support to which Gabriele was entitled was held to be $40,000. Although less than the full amount of the life insurance policy, the court held that the portion of the proceeds spent by Jessica personally prior to notice of Gabriele’s application was not deemed to be available to fund the dependant’s support, nor were the amounts expended for the purpose of her obligations as estate trustee. However, because Jessica was the beneficiary of the funds, and had failed to comply with her obligations as estate trustee under s. 67(1), she was required to personally pay the award of $40,000 to Gabriele.
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