For individuals, designating a beneficiary or beneficiaries in a life insurance policy or an RRSP account is the most advantageous way to pass on wealth to loved ones. The reason is that the insurance proceeds and the RRSP account will not form part of the estate of the insured and as such probate fee will not be chargeable on the amounts. Notwithstanding, under certain circumstances, a testator may choose to revoke the designation in his/her insurance policy and RRSP account by appointing other persons as beneficiaries in his/her will. In that case, probate fee will be payable on the value of the proceeds and account.
When there is a marriage breakdown, the spouses should be advised to amend any designation in their respective life insurance policies and RRSP accounts if it is not the intention of one spouse to allow the other to benefit from the proceeds upon death of the former. This advice is applicable to cases where the beneficiary designation is done only in the policy or RRSP account. The recent case of Gaudio v. Gaudio decided by the Ontario Superior Court of Justice confirmed this view.
In Gaudio v. Gaudio, the deceased had designated his wife to be the beneficiary of his insurance policy and RRSP accounts and had left such designation unchanged. Prior to the deceased’s death, the couple entered into a separation agreement to settle their respective entitlements upon the marriage breakdown. The Court held that the separation agreement did not contain provisions that specifically revoked such designation and as such the wife was entitled to take under the insurance policy and RRSP account in addition to her entitlement under the separation agreement.
In Ontario, bequest of a beneficial interest in property to a spouse, an appointment of a spouse as executor, and the conferring of a power of appointment on a spouse are all revoked when the testator’s marriage to that spouse is terminated by a judgment absolute of divorce. Accordingly, the testator’s designation of that spouse as the beneficiary of his/her insurance policy or RRSP account in his/her will also be terminated thereby. If that is not the testator’s intention, he/she must state so expressly in the will so as to avoid the undesired legal consequences.
Further, marriage of a testator will also revoke a will made by him/her before the marriage. As such, a will made in contemplation of marriage must state so expressly in order to avoid its revocation.
Wills and estate is one of the specialities of our firm. We tailor-make wills to suit the client’s special circumstances so as to avoid any undesired legal consequences such as revocation of gifts or appointments made under wills. To that end, the client should advise us of all the circumstances of his/her case so that these will be taken into account.
Prepared by Iris S.M. Chung
Barrister & Solicitor
Metcalfe, Blainey & Burns, LLP
Published in September 2005