Today’s article (and questionable grammar) comes from Manulife’s Tax & Estate Planning Group.
The question is: Who do you owe a financial obligation to at death?
The question in the title above is one that all estate planners need to be asking clients. If your client does not plan or think about it, the court may on their behalf. At the end of the day, this may mean that a beneficiary designation will not stand.
The case of Stevens v. Fisher, 2013 ONSC 2282 (CanLII) certainly highlights this point. Camille Stevens lived in a common law relationship for 11 years with Mark Fisher. Mark had various other relationships prior to living with Camille and had children from those unions. One of those previous relationships was with Margaret Eagles. Mark had three separate life insurance policies. The subject of the litigation arose with respect to a Sun Life policy in the amount of $84,000 where Ms. Eagles was named as beneficiary.
Camille Stevens argued that she was a dependant of Mark Fisher at the time of his death in 2010. There were more debts than assets in Mark’s estate. She therefore looked to relief via insurance proceeds. In reviewing the various policies and those in place to meet child support obligations, the court focused on one policy which named Margaret Eagles as beneficiary.
During the 11 years Camille and Mark were together, the court found that it had been a loving and caring relationship. In many instances, Camille placed Mark’s needs above her own and to her detriment financially. She worked for free at an Inn Mark had purchased. When the Inn was sold, she reaped no benefit from the sale. She provided household support and fostered a relationship with Mark’s children to ensure his contact with them. When Mark’s health declined, she cared for him up until his death. She drove him to appointments and made sure he took his medication. Camille provided full emotional and physical support to him.
After Mark’s death, Camille struggled to make ends meet. She could not return to school to upgrade her education because she was working two part-time jobs. She therefore remained in low paying jobs. Her quality of life significantly declined without Mark’s income and subsequent disability payments which contributed to the family unit. When Mark died, he left nothing in his Will for Camille other than a very small RRSP which she paid tax on.
Neither Margaret Eagles nor Camille Stevens knew about the Sun Life policy until Mark’s death. The court indicated that while Mark Fisher left the policy in place since 1995, with Ms. Eagles as beneficiary, he may simply have forgotten to change the beneficiary designation. There was no evidence to support that he had revoked the designation.
While Ms. Eagles had a long relationship with Mr. Fisher going back to childhood, with him coming to live with her family when he was a teen and then living together on and off on three occasions over the years, the court found that the tie between the two had ended in April of 2001 with a final court order . That court order settled their outstanding financial affairs. The court order was silent as to the insurance policy.
In taking all the facts into consideration, the court awarded $75,000 of the insurance proceeds to Camille and paid the remainder to Margaret Eagles. The court reviewed the case law and found that there was, in accordance with the leading cases of Cummings and Tataryn, a moral obligation to provide support and calculated an appropriate amount. The court also reviewed the dependent relief provisions of the Ontario Succession Law Reform Act (SLRA) and found her to be a dependant under the legislation.
While the issue of dependant relief claims is not new, the case certainly reminds estate planners once again that the issue must be addressed or the court will ensure that the obligation is met.
The Tax & Estate Planning Group at Manulife Financial writes various publications on an ongoing basis. This team of accountants, lawyers and insurance professionals provides specialized information about legal issues, accounting and life insurance and their link to complex tax and estate planning solutions.
These publications are distributed on the understanding that Manulife Financial is not engaged in rendering legal, accounting or other professional advice. If legal or other expert assistance is required, the service of a competent professional should be sought.