We recently wrote about a case in which a man died without a will and left behind two spouses who both claimed entitlement to his estate.
More recently, a British Columbia court faced a similar case, in which it had to settle a dispute over a man’s life insurance proceeds after he failed to update his beneficiary designation from his ex-wife to his common law spouse.
Both of these cases point towards the importance of regularly updating your will and related legal documents, especially when an important change in circumstances occurs.
Deceased Fails to Update Life Insurance Designation
The deceased passed away on June 8, 2019, at the age of 68 .
In 1987, when he was still married to his first wife, he had obtained a life insurance policy. He had designated his first wife as the sole beneficiary; no change of designation was ever filed.
The couple separated in the late 1980s and finalized their divorce in 1991.
Following their separation, the deceased had met another woman. They moved in together in 1993 and lived in an exclusive common-law relationship until the time of his death in 2019. During their time together, they jointly shared expenses, jointly contributed to the cost of their family property, and made joint decisions for the accumulation of family property.
During this time, the deceased had continued the monthly payments on the life insurance policy with automated withdrawals from the joint chequing account he shared with his common law spouse.
Upon his death, the common law spouse received the bulk of his assets by way of right of survivorship.
However, following his death, his common law spouse learned that she was not the named beneficiary of the insurance policy. On the date of his death, the benefit payable under the policy to the beneficiary was $100,000.
The first spouse and the common law spouse subsequently made competing claims over the proceeds of the insurance policy.
The first wife argued that the life insurance policy did not form part of the deceased’s estate and, by reason of being the sole designated beneficiary, she was the sole valid claimant under the policy and the proceeds should be paid to her.
The common law wife sought an order declaring that the life insurance policy was held in trust for her and an order directing that the proceeds be paid to her. Alternatively, she sought damages in an amount equivalent to the value of the proceeds.
Court Awards Life Insurance Proceeds to Common Law Spouse
The court first considered the deceased’s intentions.
It found that he had maintained feelings of hostility toward his first wife after their separation and divorce. He had also become estranged from their two children. As such, his 2012 will indicated that he had deliberately disinherited his first wife and the two children from his estate.
As to the deceased’s intention to designate his common law spouse as his beneficiary, it found that he had intended to change the designated beneficiary on his life insurance policy to the common law spouse, in particular because he had left the entirety of his estate to her in his will.
The court therefore determined that it had been the deceased’s clear intention to remove his first wife as a beneficiary from his life insurance policy but forgot or neglected to do so.
Additionally, the court allowed the common law spouse’s claim of unjust enrichment. It explained that the test for unjust enrichment requires: (1) an enrichment of the defendant; (2) a corresponding deprivation of the plaintiff; and (3) an absence of juristic reason (such as a contract) for the enrichment.
In the present case, the court found that the common law spouse had suffered deprivation, because the insurance premiums had been paid from her joint account with the deceased. It further found that the first wife would be enriched if she received the proceeds, and it did not find any juristic reason for the enrichment.
As such, the court found in favour of the common law spouse’s claim in unjust enrichment and imposed a remedial constructive trust.
In the result, the court therefore held that the common law spouse was entitled to the proceeds from the deceased’s life insurance policy and so ordered.
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