When a dependant trumps a named beneficiary

The law is not black and white, and the shades of grey are apparent when you consider Part V of the Ontario Succession Law Reform Act (SLRA), which may allow a dependant of a deceased person to access insurance proceeds that have been paid outside of an estate.

In 2013, the Ontario Supreme Court considered these provisions in Stevens v. Fisher, pitting a deceased’s common-law spouse against a prior spouse who was the named beneficiary on a group life insurance policy.

Family history

Mark Fisher had two children during a marriage that ended in 1988, and two more children during a 10-year common-law relationship afterward. Two further common-law relationships followed—13 months with Constance Eagles, and 11 years with Camille Stevens until his death in 2010 at age 52.

Fisher’s debts exceeded his assets, leaving Stevens destitute.

There were three life insurance contracts:

• a Manulife policy for $50,000, payable to his daughter from his first relationship (his son died many years earlier);
• a Transamerica policy for $250,000, payable to his first common-law spouse in trust for his two youngest children, one of whom is autistic and requires 24-hour care; and
• a Sun Life group policy through his employer for $84,000, payable to Eagles.

Neither Stevens nor Eagles was aware of the Sun Life policy until after Fisher’s death.

Making the dependant’s claim

Stevens was devoted to Fisher during their decade-plus-long relationship. She accommodated the couple’s routines and housing moves, limiting her employment to part-time waiting and counter staff positions and working for free in a business from which Fisher alone profited. She drove him to see his children and to the doctor when his health was deteriorating.

During this time, she was unable to maintain steady employment. They managed to make ends meet using Fisher’s disability income, which stopped shortly after his death.

The judge concluded Stevens was clearly a dependant entitled to a claim, but to what amount?

Stevens was not claiming a property interest in any estate assets; rather, she was claiming under SLRA Part V to obtain support payments out of the estate prior to distribution to beneficiaries. But the estate had a net negative value.

So Stevens sought to include the Sun Life policy payable to Eagles. For support purposes, Section 72 of Part V expands the estate to items and arrangements over which a deceased had control while living—gifts just before death, property held under joint ownership with right of survivorship and life insurance owned by the deceased.

Applying law to facts

Eagles argued Stevens should also be claiming against the other insurance policies. The court rejected this argument because those policies were meant to care for other dependants.

The judge fixed the support at $65,000 based on a combination of the estate’s ability to pay and the dependant’s need. To this he added $10,000 for Fisher’s moral obligation to provide Stevens with more than just the bare legal obligation. Eagles was entitled to the remaining $9,000 value of the policy.

As a testator, should you share the contents of your will or larger estate plan with your beneficiaries? Legally, you’re not obligated to do so. But practically, full disclosure avoids problems for all involved.