Divorces can change many things in relation to rights between two people, but it may not change everything you want it to.

Life insurance is a case in point. For example, let’s say Doug marries Jane and names her as the beneficiary of his $2,000,000 life insurance policy. After five years of marriage, Doug and Jane divorce and each “waives all rights to the other’s property except as set forth in this agreement”. The marital settlement agreement/property distribution divides assets between Doug and Jane.

Post-divorce, Doug never removes Jane’s name as the designated beneficiary on the insurance policy. Doug later remarries Susan, and stays married to her for 20 years until his death. As soon as Doug remarried 20 years previously, his existing will was considered revoked automatically, so it’s clear that Jane isn’t entitled to anything under the will. But Jane is still listed as the beneficiary on the life insurance policy. Who is entitled to the $2,000,000 – ex-spouse Jane or surviving-spouse Susan?

Based on Ontario court rulings, ex-spouse Jane may actually be entitled to the life insurance proceeds, despite the divorce settlement language. You can read about a similar case here: https://www.osler.com/en/blogs/pensions/october-2009/beneficiary-designation-in-favour-of-former-wife-t

Cases like this reinforce the need for spouses who are separating or divorcing to revisit all their estate planning documents to ensure they reflect their current wishes. This recent post contains a good discussion of how marital breakdowns can lead to unintended estate consequences unless a review of estate documents takes place – and changes are made if needed: http://www.osullivanlaw.com/blog/2015/03/the-importance-of-updating-your-affairs-on-separation-and-divorce.shtml

When the zip goes out of marriage, it’s still important to show your estate some love and do a thorough review of your assets and the documentation associated with them.

Thank you for reading.
Ian Hull