Canada: Support Payor's Death Leads To Complex Court Case Involving Estranged Wife, Fiancee And An Unborn Child

Before Stephen died, he prepared a will — contrary to a court order — that split his life insurance between his two families. That's when the lawyers got involved

When people separate and re-partner, life can be complicated. But when someone who may be supporting two families passes away, the problems can become even stickier.

Dagg v. Cameron, a recent decision of Ontario's Court of Appeal, dealt adeptly with this issue, and solved a conundrum which has faced family and estates lawyers for several decades.

When the Cameron family first found their way into court, there was nothing unusual about their case. Stephen and Anastasia Cameron had been married for a number of years and had two young children. Stephen consented to a court order to pay child and spousal support to Anastasia and agreed to the usual court order that he maintain Anastasia as the irrevocable beneficiary of his life insurance policy.

In family law, life insurance is often required to provide security for support in the event of the death of the payor. Some court orders and agreements state that the amount of life insurance reduces over time, as the payor's support obligation reduces. Children, after all, grow up and eventually are no longer entitled to support, and spouses may have a time-limited support entitlement.

This was not the case with the Camerons, however: Stephen's obligation was to maintain his $1,000,000 policy, with no reduction or end date.

After Stephen and Anastasia separated, Stephen rekindled a relationship with an old acquaintance, Evangeline, who lived in the United States. They saw one another as regularly as possible, given the distance between them.

To complicate things further, Stephenu2019s estate was insolvent: the only asset was the life insurance

Sadly, Stephen was diagnosed with cancer. Evangeline became pregnant with Stephen's child, and they decided to marry, but Stephen died before his divorce with Anastasia was finalized, and Evangeline and Stephen never married. Stephen never met the son to whom Evangeline gave birth after Stephen's death.

Before Stephen died, he prepared a will, contrary to the court order, that split his estate and his life insurance between Anastasia and their two children, and Evangeline and their as-of-yet unborn son.

To complicate things further, Stephen's estate was insolvent: the only asset was the life insurance.

These circumstances spawned a trial and two appeals. Three different courts struggled with the overlapping and intricate web of family and estates legislation and how Stephen's estate and life should be divided between the two families.

In Ontario, when a person dies, the Succession Law Reform Act may apply. (All provinces have similar legislation.) Among other things, the Act addresses "dependant's relief claims."

"Dependant's relief" may be available to a person who is a "dependant" of the deceased, defined as a spouse, parent, child or sibling to whom the deceased was providing support, or to whom he had a legal obligation to provide support, immediately before his death. A spouse includes married spouses, as well as common law spouses who have lived together for three years. But if a common law couple has had a child, the survivor need only have been in a "relationship of some permanence" to be entitled to dependant's relief. 

What is interesting about dependant's relief — which in simple terms is just a share of the estate — is that the Act says that the estate does not just consist of the assets the deceased owns when he dies.

For the past forty years, the Succession Law Reform Act has contained draconian provisions which allow a court to claw back assets into the deceased's estate to satisfy dependant's relief claims. The assets that can be clawed back include property held by the deceased in joint tenancy with another person at the date of death, or life insurance owned by the deceased which designates a named beneficiary other than the dependants.

In Dagg v Cameron, when Stephen split the life insurance that he had already agreed to hold only for Anastasia and the children, family law and estates law were set on a collision course.

There was no doubt that Anastasia and her two children were dependants of Stephen's estate: At the time of his death he was under a court order to pay support and maintain life insurance to secure the support. While Evangeline was not yet married to Stephen, she later gave birth to his child. At an interim stage, the court found that the baby was a dependant and that Evangeline was a 'spouse', but wanted more evidence about whether Evangeline was a 'dependant'. Ultimately at trial, Evangeline was found to be a 'dependant'.

The judge found that all of the $1,000,000 of life insurance could be clawed back into the estate, and as Anastasia was not a secured creditor, she and her children had no priority over Evangeline's claims.

At the first level of appeal, the Divisional Court upheld the trial judge.

The Court of Appeal came to a different conclusion. While the Court of Appeal agreed that the life insurance could be clawed back into Stephen's estate, it went on to find that Anastasia had rights as an unsecured creditor, because the consent court order required that she be named as irrevocable beneficiary of the life insurance.

Although the court decided that Anastasia and her children were creditors, the court limited their rights. The court found that they were creditors only to the extent that the policy's proceeds were necessary to satisfy Stephen's obligations for the remaining support payable to Anastasia and the children: any amount remaining would form part of the estate for dependant's relief for Evangeline and her son.

Because most child and spousal support agreements and court orders require a payor to maintain life insurance, the outcome gives first families a reason to breath a sigh of relief if the worst happens.

Payors who have re-partnered, however, ought to make careful plans to  ensure that their new family unit is also protected.

Originally published by Financial Post.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions