Tag: designations

06 Apr

Beneficiary Designations Left Unchanged Are Not Changed

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In Chanowski v. Bauer, the Manitoba Court of Appeal recently revisited the recurring dilemma posed when the uncompromising law of insurance beneficiary designations runs up against facts that may seem to call for an equitable remedy.

The deceased had a group life insurance policy in the amount of $55,000, which he held through his employer.  When he lived with his first common-law wife (on and off for a period of four years), he executed documents listing her as his beneficiary.  However, at the time of his death, he had a different common-law wife.  Notwithstanding these facts: (i) the deceased had not had any relations whatsoever with the first spouse for some thirteen years, (ii) the first spouse had remarried, and (iii) the deceased had held his house and all assets jointly with the second spouse with whom he had lived for ten years, the Trial Judge found that the first spouse nonetheless received the benefit of the deceased’s group life insurance. The second spouse appealed this finding and lost on appeal.

The Appellant’s counsel gamely tried every available argument but did not succeed.  The Court of Appeal "while having much sympathy" for the Appellant, determined that it was bound by Manitoba’s statute (virtually identical to Ontario’s) and found as follows:

"The documents which Ms Chanowski would have the court accept as evidence of a change of beneficiary do not provide the necessary clear and express intention to remove Ms Bauer and appoint Ms Chanowski as his beneficiary.  They merely speak to Mr. Miterek’s intention to increase the amount of his death benefits and to insure the life of his current common-law wife.  One may speculate that it is unusual for an individual to increase the death benefits for a former common-law spouse, but more is needed here than speculation to override a written designation (emphasis added).

David M. Smith – Click here for more information on David Smith.

02 Jun

Is the Door Forever Closed on Substituted Testamentary Disposition?

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On April 7, 2009, I blogged on the decision of Justice Strathy in Richardson (Estate Trustee of) v. Mew.  In that decision, His Honour considered the situation where a deceased’s first spouse was unexpectedly the named beneficiary of a life insurance policy owned by the deceased, the second spouse seeking to remedy what she argued to be an unjust situation. As I noted, His Honour, while not exercising his jurisdiction to rectify the policy, 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.

The Ontario Court of Appeal released a unanimous decision on May 14, 2009 upholding Justice Strathy’s decision.  Of particular significance to the trusts and estates bar, the Court of Appeal clearly stated that, after the mental incapacity of the donor, the attorney under a power of attorney was not permitted to change a beneficiary designation even in circumstances where there was compelling evidence that the donor would have done so if capable:  "As a fiduciary in a role rising to that of trustee, [the second wife] was bound to use the power only for Mr. Richardson’s benefit."

In commenting on the case, The Lawyer’s Weekly has noted that counsel for the disappointed second wife is seriously contemplating an application to the Supreme Court of Canada for leave to appeal.  In question: is there ever a situation in which the attorney under a Power of Attorney ought to have power to act in the best interests of the donor to effect a testamentary disposition that accords with his or her last known intentions before becoming incapable?

David M. Smith 

07 Apr

Correcting Beneficiary Designations

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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

 

18 Dec

The Core Issues Concerning Estate Taxes – Hull on Estates and Succession Planning Podcast # 91

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Listen to The Core Issues Concerning Estate Taxes

This week on Hull on Estates and Succession Planning, Ian and Suzana discuss the core issues surrounding estate taxes.

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16 Oct

Beneficiary Designations – Hull on Estate and Succession Planning Podcast #82

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Listen to Beneficiary Designations

This week on Hull on Estate and Succession Planning, Ian and Suzana discuss core issues in estate planning; specifically the importance of beneficiary designations.

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04 Aug

MAKING AND REVOKING OF BENEFICIARY DESIGNATIONS – PART V

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We have made note this week of the fact that a beneficiary designation is subject to considerably less legal formality than a Will. The fact that many Canadians do not have Wills often means that the designation of a beneficiary is the primary means by which an individual engages in estate planning. This is particularly true of those in their thirties or forties whose largest assets will often be RRSPs or life insurance policies. We have noted that such estate planning has the benefit of clearly directing assets to the intended beneficiary without the need for obtaining probate of a Will.

Certainly, non-legal professionals such as financial advisors will frequently highlight the benefits to their clients of structuring their affairs in such a way as to minimize estate administration tax. Lawyers, as well, will recommend such benefits, mindful of the pitfalls associated when a beneficiary does not act as intended. For instance, where an individual designates a beneficiary of an asset, not for that person’s personal benefit but rather, to distribute in accordance with a Will or some other written or verbal instructions (ie. a secret trust), the issue of trust becomes paramount.

What if the beneficiary does not distribute the asset as the deceased intended but keeps it for herself? For the litigation lawyer, it may be a serious challenge to prove a breach of trust on behalf of disappointed beneficiaries. The designated beneficiary can simply take the position that she has received all right, title and interest in the asset. If the designated beneficiary is herself named executor of the deceased’s estate, there may well be some legitimate questions as to whether she was expected to distribute the asset in accordance with the Will. The designation, if contained in the Will, may ideally clarify whether the asset is to be subject to the terms of the Will.

Have a great weekend and we’ll be back on Tuesday, David. ——–

01 Aug

MAKING AND REVOKING OF BENEFICIARY DESIGNATIONS – PART II

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Yesterday’s blog introduced the topic of beneficiary designations and considered the law in Ontario as it related to the making of beneficiary designations. Today, we consider the law as it relates to the revocation of such beneficiary designations. This applicable statute is section 52 of the Succession Law Reform Act which, as annotated, reads as follows (with underlined words added for emphasis):

s. 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.

The revocation of a RRSP, for example, must reference the RRSP in sufficient detail, to leave no doubt as to which instrument is being revoked. However, the Courts have had to consider how to interpret this subsection. We will consider this issue further in tomorrow’s blog.

(2) Despite section 15*, a later designation revokes an earlier designation to the extent of any inconsistency.

*Section 15 of the SLRA states that a will is revoked only by: marriage, a later will, a written declaration made with the formality of a will, or destruction by the testator or another person under his or her presence and direction.

(3) Revocation of a will revokes a designation in the will.

(4) A designation or revocation contained in an instrument purporting to be a will is not invalid by reason only of the fact that the instrument is invalid as a will.

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31 Jul

MAKING AND REVOKING OF BENEFICIARY DESIGNATIONS – PART I

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Hello, my name is David M. Smith and I am a partner (and now one of the resident bloggers) at Hull & Hull LLP. The focus of this week’s blogs will be on beneficiary designations. While the natural tendency is to focus on the assets of the estate, we know that the reality is that, quite often, those assets which pass outside of the estate by way of beneficiary designation will exceed the value of the estate assets.

Indeed, an increasingly common estate planning tool is to hold as many assets as possible outside of the estate, primarily as a legitimate means of avoiding estate administration tax (more commonly known as probate fees) and, in certain cases, protection from creditors.

The most common example of such assets that come to mind are Life Insurance, Registered Retirement Saving Plans ("RRSP") or Registered Retirement Income Funds ("RRIF"). Similarly, (and an issue to be considered in future blogs), assets that are jointly held (unless impressed with a trust for the estate) will pass to the surviving joint owner by right of survivorship.

The making and revoking of beneficiary designations are not always simple matters and, regrettably, litigation may ensue where there is uncertainty. Recent caselaw has raised some interesting twists on this developing area of estate litigation.

In Ontario, the provisions of Part III of the Succession Law Reform Act relating to the making of a beneficiary designation are contained in section 51 which reads as follows (within underlining added for emphasis):

s. 51(1) A participant may designate a person to receive a benefit payable under a plan on the participant’s death,

(a) by an instrument signed by him or her or signed on his or her behalf by another person in his or her presence and by his or her direction; or (b) by will, and may revoke the designation by either of these methods.

s. 51(2) A designation in a will is effective only if it relates expressly to a plan, either generally or specifically.

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