Most people leave significant assets to their spouse in their will. But what if there’s a falling out and the marriage ends in divorce?
In Ontario, certain parts of a will becomes null after a divorce is granted. Particularly, clauses pertaining to the following items are considered revoked, unless contrary intention by the testator appears by the will:+
- a devise or bequest of a beneficial interest in property
- an appointment of the former spouse as executor or trustee
- the conferring of a general or special power of appointment on the former spouse,
Accordingly, a person need not be worried about assets falling into the hands of the former spouse if he or she should die the moment after the divorce is granted.
What about insurance proceeds?
In law, insurance policies are governed by the Insurance Act, and proceeds of an insurance policy are not considered part of the estate. The Insurance Act provides that an insured person may from time to time alter or revoke the designated beneficiary by a declaration.*
Consequently, the application of the Succession Law Reform Act and the Insurance Act often leads to the unfortunate situation where the testator has not revoked the designation before his or her death, and the proceeds of the insurance policy fall into the hands of a former spouse.
In a recent case^ decided by the Ontario Superior Court, this is exactly what happened. The deceased divorced his first wife in the early 1990′s and appointed his second wife as the trustee and beneficiary of the estate. However, he did not revoke the designation of his first wife as insurance beneficiary. The estate tried to contest the validity of the insurance designation and sought to include the proceeds from the insurance policy as part of the estate.
Alas for the estate trustee (the second wife), the court ruled that the declaration of a beneficiary in a life insurance policy is normally unassailable. The designation of a former spouse as a beneficiary indeed survives a divorce. Without a valid declaration to vary the beneficiary designation, the first wife was entitled to the insurance policy proceeds, which did not form part of the estate.
+Succession Law Reform Act, R.S.O. 1990, c. S.26, s.17
*Insurance Act, R.S.O. 1990, C. I. 18, s. 190(2)
^Richardson (Estate Trustee of) v. Mew (2008), 93 O.R. 3d 537
