Payment of child and/or spousal support is common place in family law matters. So too, is the securing of those support payments to ensure that the recipient(s) continue to receive support after the support payor dies while the recipient(s) is still entitled to support. S. 34(1)(i) of the Family Law Act, R.S.O. 1990, c. F.3, gives courts the jurisdiction to “make an interim or final order, requiring that a spouse who has a policy of life insurance as defined under the Insurance Act designate the other spouse or a child as the beneficiary irrevocably”. This way, if the payor dies while the support recipients are still entitled to receive support, the proceeds of the life insurance policy can be used to replace the support payments.
The reliability of this provision has been called into question following the decision in Dagg v. Cameron Estate, 2015 ONSC 6134 . In that decision, Justice Douglas found that even though the support payor, Mr. Cameron, had been ordered to irrevocably designate his wife (from whom he was separated) as the irrevocable beneficiary of his life insurance policy, the proceeds of that policy were available to be “clawed back” into his estate for the benefit of all his dependents, including his infant son with his new partner. In doing so, Mr. Cameron’s wife, and their children, was denied the full benefit of the insurance proceeds that had been promised to her.
Until this decision, family lawyers had relied almost exclusively on a provision for an irrevocable beneficiary designation in order to secure support for their clients – the decision in Dagg v. Cameron Estate necessarily calls into question the reliability of such agreements. This case is set to appear before the Ontario Court of Appeal, at which point the family law bar is hoping that the decision will be overturned, thereby resolving this very important issue.
In the meantime, however, support recipients who want to secure their support payments will need to negotiate a settlement that includes transfer of ownership of the relevant life insurance policy (whether as a whole, or as a joint owner with a right of survivorship) in order to avoid having the policy proceeds “clawed back” into the deceased’s estate under the SLRA, as was the case in Dagg v. Cameron.