Estates & Wills & Trusts

Divorce agreements can affect estate settlements: Horst

By Tony Poland, AdvocateDaily.com Associate Editor

Failing to fulfil your obligations in a divorce settlement can be costly, even after you pass away, says Toronto wills and estate lawyer Marlin Horst.

Noting a recent Ontario Superior Court case that awarded a deceased man’s ex-wife the $500,000 she would have been entitled to in a life insurance policy that was never purchased, Horst says it’s also important to ensure any agreement you make is clearly defined.

Court heard that when the couple divorced, the ex-husband agreed to take out a $500,000 life insurance policy naming his former wife as the irrevocable beneficiary. However, the man failed to secure the policy.

When he died, his ex-wife made a claim against his estate, and the court ruled in her favour.

“It’s the right judgment,” says Horst, partner with Shibley Righton LLP. “The requirement was to maintain life insurance and the individual failed to do that.

“Prior to his death, his ex-wife could have sued him for not maintaining a policy so that same suit can go against the estate.”

At the time the marriage broke down, there was an agreement in place that entitled the ex-wife to spousal support along with being named the beneficiary in the insurance policy, according to court documents.

At issue before the court was whether the policy was simply intended to “secure” payment of spousal support in the event the man died before his obligations were fulfilled.

However, in his summary judgment, Justice Michael Varpio ruled that the separation agreement contained no definitive language to indicate that the purpose of the policy was to ensure support was paid to completion, and “there is no genuine issue for trial insofar as the insurance obligation.”

“The judge made it pretty clear that the requirement to maintain insurance was not tied to the support,” Horst tells AdvocateDaily.com. “Often, support obligations run out at a certain point in time, but there was nowhere in the life insurance provisions stating that the life insurance could be terminated after the support obligations ran out. It was pretty obvious that there was no need for a trial on that point.”

He says the case also serves as yet another reminder to be clear when drawing up contracts.

“I think what it does say is that if you’re a family lawyer and you want to tie life insurance to spousal support, you better make it clear in the agreement,” Horst says. “There nothing here that said they were connected in any way.”

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