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The law is not black and white. The fact that there are shades of grey is apparent when considering 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.

The Ontario Supreme Court considered these provisions earlier this year in Stevens v. Fisher, pitting a deceased’s common-law spouse against a prior common-law 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 aged 52.

Fisher’s estate consisted of a house and its contents, several old vehicles that were leftovers from his occasional buy-sell activities, as well as $5,000 in a bank account. His debts exceeded these assets. Debts included a $197,000 line of credit and $50,000 of unsecured debt. Stevens was the named beneficiary of Fisher’s only RRSP account, valued at $1,911.

There were three life insurance contracts:

  1. a Manulife policy for $50,000, payable to his daughter from his first relationship (his son died many years earlier);
  2. 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
  3. 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. When Eagles and Fisher’s relationship ended, a payment of $12,500 had been made to Eagles in the final settlement (and court order), with no mention of this insurance policy.

Making the dependant’s claim

There is a detailed account of the interdependency of Stevens and Fisher over their decade-plus-long relationship.

To accommodate the couple’s routines and housing moves, Stevens limited her employment to part-time waiting and counter staff positions. The summary does not suggest this as a matter of unfairness, but more as an indication of devotion. That said, for a couple of years Stevens worked for free in a distant cottage resort business from which Fisher alone profited $38,000.

She would drive him to see his children and to the doctors, particularly in his last years when his health was deteriorating. During this time, she was unable to maintain any steady employment, and they managed to make ends meet using his disability income of about $5,000 each month.

The survivor benefit on the disability income continued very briefly after his death, and since then she has struggled with multiple concurrent minimum wage part-time jobs. The judge noted, “Now, the only life she has involves working to survive.”

The judge concluded Stevens was clearly a dependant entitled to claim, but 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. Despite this distinction, such a claim would still have been fruitless when considering the formal estate alone, given the net negative value.

In an attempt to give effect to the claim, 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.

This includes items such as gifts mortis causa (i.e., gifts just before death), property held under joint ownership with right of survivorship and life insurance owned by the deceased. Group life insurance (which is not always owned by the person whose life is insured) is a specifically enumerated item in the section.

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.

After considering a variety of ways to calculate the support amount, the judge fixed it 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.

Doug Carroll, JD, LLM (Tax), CFP, TEP, is vice president of Tax and Estate Planning, at Invesco Canada.

Originally published in Advisor's Edge Report

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