Rehel v Methot: Life Income Funds and Testamentary Beneficiary Designations
In yesterday’s blog post, I discussed Justice Gomery’s recent decision in Rehel v Methot, 2017 ONSC 7529, where the Court was asked to resolve the question of the beneficial entitlement to the Deceased’s life income fund account (the “Account”).
The Deceased named his ex-spouse, Sharon, as the beneficiary when the Account was first opened. However, in his later Will, the Deceased directed the Estate Trustee of his Estate to use the proceeds of the Account to service his debts.
Having concluded that the Sharon was not automatically entitled to the Account by operation of provincial pension benefits legislation, the residual question was whether the direction under the Will overrode the prior beneficiary designation in Sharon’s favour.
Designations Under Part III of the Succession Law Reform Act
Subsection 51(1) of the Succession Law Reform Act (the “SLRA”) states that a participant (i.e. the person entitled to designate another person to receive a benefit payable under a plan on the participant’s death) may designate a person to receive a benefit payable under a “plan” (as defined under the Act) by an instrument signed by him or her or by Will. Subsection 51(1) also states that the person may also revoke the designation by either of these methods.
However, pursuant to subsection 51(2) of the SLRA, a designation in a Will is only effective if it relates “expressly to a plan, either generally or specifically.” Similarly, under subsection 52(1), a revocation in a Will is effective to revoke a designation made by instrument “only if the revocation relates expressly to the designation, either generally or specifically.”
Subsection 52(2) goes on to state that a later designation revokes an earlier designation, to the extent of any inconsistency.
The Parties’ Positions
In Rehet, Sharon argued that the instructions under the Will were not an effective revocation under subsection 52(1), as they do not mention the earlier designation in Sharon’s favour.
Conversely, the Estate Trustee argued that the designation does not have to meet the formal requirements of subsection 52(1), so long as it complies with subsections 51(2) and 52(2). In other words, a designation should prevail if it is a later designation that relates expressly to a plan.
Both parties relied on the Court of Appeal’s decision in Laczova Estate v Madonna House (2001), 207 DLR (4th) 341, where the testator made a holograph will where she listed two RSPs as her assets and then made bequests to twenty two beneficiaries. The estate trustee in Laczova similarly argued that the reference to the RSPs under the testator’s will was a designation under subsection 51(2) and revoked the earlier designation in accordance with subsection 52(2).
In Laczova, the Court of Appeal rejected the estate trustee’s argument because the testator had not designated a specific person or persons as beneficiaries of her RSPs under her later Will.
Justice Gomery’s Decision
Although the Court of Appeal’s decision in Laczova had favoured the prior designated beneficiaries, Justice Gomery held that the Court’s conclusions supported the Estate Trustee’s position in Rehel.
Justice Gomery noted that the Court of Appeal had not rejected the logic of the Estate Trustee’s argument regarding the operation of subsections 51(2) and 52(2), despite finding in favour of the prior designated beneficiaries.
In addition, Justice Gomery held that the Court of Appeal’s reasoning in Laczova suggested that the rationale for subsection 51(2) is to give estate trustees and financial institutions sufficient information to act on the directions in a Will.
In the present circumstances, the Court concluded that there was no ambiguity as to the Deceased’s intentions. The Court concluded that the Will revoked the earlier designation, and that the designation under the Deceased’s Will prevailed.
Thank you for reading,
Umair Abdul Qadir