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When a couple goes through divorce or separation they may be able to negotiate some or all of the issues before them without the need to litigate. It’s common for lawyers to be involved in these negotiations and the minutes of settlement that come out of them. The importance of having experienced legal advice is illustrated in a recent decision from the Supreme Court of Nova Scotia.  

Life insurance guarantees child support

The parties were married in the summer of 1996. They had two children, twins, who were born two years later. They parties separated in 1999 and entered into an Agreement and Minutes of Settlement. The agreement stated that the father was to take out a life insurance policy that would provide outstanding child support in the event he passed away before the children reached 18 years of age. The mother was named as a trustee on the policy and was to look after the money until the children were 18.

It’s common when such agreements are put in place that the owner of the policy not be able to change the beneficiaries of the policy, or that the beneficiaries cannot be changed without their consent. In this case, no such wording appeared in the agreement.

Father names new partner as beneficiary and trustee

In 2005 the father entered in a new relationship. Four years later he named his girlfriend as a 50% beneficiary of his insurance policy and also named her as the trustee for the other half which was still designated to go to his children if he died.

Unfortunately the father died in a swimming accident in September 2011. His children were still minors at the time of his death. It wasn’t until his death that the mother learned of the father’s new relationship. The girlfriend reached out to state that the father’s insurance policy had named the children as benificiaries for 50% of the proceeds, while the girlfriend received the other half as well as the responsibility to hold the money in trust for the children. The mother responded by stating that she was supposed to be the trustee and that the children were supposed to receive all of the money from the insurance policy.

The children eventually received their 50% of the money as well as interest, but they filed a claim against the girlfriend stating that she was unjustly enriched by the insurance payout. They also stated that they suffered a corresponding deprivation.

The girlfriend relied on the wording of the agreement, which did not state that the children were to be the sole benificiaries of the insurance policy. The court, however, did not agree, referring to emails between the parents and their lawyers. The spirit of the agreement was that the children were to receive the entire life insurance policy and that as a result the girlfriend was unjustly enriched when the father changed the policy to incude her as a beneficiary. The court wrote,

“In addition, in my view, public policy dictates (the girlfriend) not be permitted to keep the funds.  Spouses who enter into contractual arrangements to secure the payment of child support should be held to those bargains.  It would be improper to allow (the father’s) designation of (the girlfriend) as a 50% beneficiary to stand, in the face of his previous agreement to name (the mother) trustee of these funds for the benefit of the boys.”

Contact Gelman & Associates to learn how experienced family law lawyers can ensure the best possible support arrangement for your children. Serving six offices throughout North York, Downtown Toronto, Mississauga, Scarborough, Aurora and Barrie, our offices are easily accessible by transit and off-highway. In order to be available to clients and prospective clients, our phone lines are open Monday to Friday from 8 AM to 8 PM. Call us at (416) 736-0200 or 1-844-736-0200 or contact us online for an initial consultation