Declarations of beneficiaries of Life Insurance policies are sometimes thought to be “unassailable.” However, where a deceased’s first spouse is unexpectedly the named beneficiary of a life insurance policy owned by the deceased, the second spouse may have recourse to various legal remedies in an attempt to remedy what is argued to be an unjust situation. Inevitably, a Separation Agreement between the deceased and his or her first spouse is central to any such argument.
The recent decision of the Honourable Justice Strathy in Richardson (Estate Trustee of) v. Mew considered such a situation. The case also stands as an excellent summary of the recent jurisprudence that has developed in this area.
In short, the disappointed spouse can seek the remedies of either constructive trust or rectification. Justice Strathy points out that “except in exceptional circumstances” the Insurance Act requirements for the change of a beneficiary designation must be strictly interpreted. His Honour clearly had difficulty with understanding “how the designation of a beneficiary under a life insurance policy could be anything other than a juristic reason for an “enrichment.” Although he did not find this to be a case for the exercise of the court’s jurisdiction to rectify the policy, he left open the possibility that, in the right set of circumstances (i.e. clear evidence of a mistake), the court could properly employ such a remedy.
David M. Smith
This week on Hull on Estates David Smith and Sarah Hyndman Fitzpatrick talk about estate planning in uncertain economic times. They discuss how the current economic situation has impacted estate planning and litigation and new tools (such as the "Tax Free Savings Account") to consider in creating you estate plan.
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Earlier this week I blogged on how estates disputes can take on layers of complexity when principles of Family Law and Contract Law are brought into the process. The recent decision of the Ontario Court of Appeal in Frye v. Frye Estate demonstrates an instance of complexity arising out of the relationship between a shareholder’s agreement and a Will. At issue was a simple question: can the terms of a shareholder’s agreement restrict the testamentary freedom of a shareholder insofar as the shares are concerned? The Court found as follows:
- Contractual obligations do not constrain a person’s ability to bequeath property by means of a will. Rather such obligations may give rise to an action for breach of contract but do not affect the validity of the Will itself.
- Legal title to the shares is transmitted by the Will to the estate trustees, who hold them in trust for the beneficiary of the shareholder’s Will…However, the estate trustees are bound by the shareholder’s agreement and cannot distribute the shares out of the estate without complying with the shareholder’s agreement. The estate trustees’ inability to transfer the shares immediately does not, however, render the bequest void.
- A further complication was the fact that the intended beneficiary of the shares and the estate trustee of the deceased shareholder’s estate were the same person.
Frye will no doubt be the subject of further commentary in the estates bar in the weeks ahead.
David M. Smith
The Interrelationship Between a Guardian of Property and a Trustee Under a Testamentary Trust – Hull on Estates Podcast # 133
This week on Hull on Estates, Rick Bickhram and David M. Smith discuss the complications that can arise when an incapable person is both the subject of a guardianship order and the beneficiary of a testamentary trust.
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Listen to Initial Estate Meetings
This week on Hull on Estate and Succession Planning, Ian and Suzana discuss how important it is to be prepared for an initial meeting with an estate lawyer.
They have also been listening to and reading David Maister’s new (audio)book Strategy and the Fat Smoker and continue their conversation on The Tipping Point by Malcolm Gladwell.