Act On Your Legal Obligations To Avoid Post-Death Disputes

A recent case from the Ontario Superior Court of Justice, Birnie v Birnie, 2019 ONSC 2152, has several important lessons for Canadians when it comes to estate planning. The case is an important reminder to be aware of your existing legal obligations when making your estate plans. It is also a good reminder to revisit your estate plans after major life events, such as a separation. Finally, it again reminds us about the importance of clearly recording your intentions when preparing legal documents.

Background

In Birnie, the deceased and his former wife entered into a separation agreement in the context of a divorce. The agreement obligated the deceased to obtain a life insurance policy in the amount of $500,000, naming his former wife as irrevocable beneficiary, as security for his spousal support obligations. We don't practice family law, but understand that this kind of arrangement is not out of the ordinary in separation agreements. The separation agreement also contained releases by the former spouses against each other's estates.

The deceased never obtained the insurance policy. He subsequently re-married. At his death, the deceased's estate was worth approximately $1.6 million.

The deceased's former wife brought an application against the deceased's estate, seeking summary judgment in the amount of $500,000 in satisfaction of the deceased's obligation to obtain a life insurance policy in that amount. The deceased's second wife, opposed the application both in her personal capacity and as the personal representative of the estate.

Issues for the Court

The main issue to be determined was whether the deceased's insurance obligation in the separation agreement was a "stand-alone" clause or whether its purpose was solely to "secure" future support payments for the former spouse.

If it was a stand-alone clause, the estate would be liable to the former spouse for the entire $500,000. Conversely, if the clause was only intended to "secure" support payments, then the estate would not be liable to the...