Don’t Forget About Beneficiary Designations

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There are few things in life more important than family.  We work hard at our careers to provide financial security to our loved ones.  We set aside funds to pay for our kid’s post-secondary education so that they can get the training and experience necessary to succeed in life.   As yet, many of us fail to engage in what is perhaps one of the most unselfish things that a person can do … spend a little time doing some very basic estate planning.

Consider the case of Ronald Carrigan.  Ronald married Melodee in 1973.  The couple had two daughters and in his will in 1986, Ronald named Melodee and his two children as the sole beneficiaries of his estate.

In 1996, the relationship between Ronald and Melodee broke down and a few years later, Ronald entered into a new relationship with Jennifer although he never formally divorced Melodee and there was no separation agreement with his former spouse.  Sometime after he began his relationship with Jennifer,  Ronald named Melodee and his two daughters as the beneficiaries of the death benefit of his Ontario pension plan.

Ronald died unexpectedly in 2008 at the age of 57.  Both Melodee and Jennifer claimed entitlement to Ronald’s pre-retirement death benefits.  

Section 48 of the Ontario Pension Benefit Act governs pre-retirement death benefits which are to be paid out in the following order of priority:

1.    To the plan member’s spouse at the date of death unless the plan member is living separate and apart or the spouse has signed a waiver of benefits.

2.    To the designated beneficiary unless there has been a court order, arbitration award or domestic contract in favour of a former spouse.

3.    To the plan member’s estate.  

At first blush, it would appear that Jennifer would be entitled to the pre-retirement death benefits since she was in a common law partnership with Ronald at the time of his death.  The Act defines “spouse” to include “two persons who are living together in a conjugal relationship continuously for a period of not less than 3 years …”

This was the position taken by the Financial Services Commission of Ontario (who is responsible for administering the Pension Benefit Act), the trial judge and the dissenting Court of Appeal judge.  However, the majority for the Court of Appeal held that since Ronald was living separate and apart from his first spouse, Melodee, then the first test under s. 48 of the Pension Benefit Act did not apply.  Accordingly, under the second test, the pre-retirement deaths were awarded to the designated beneficiary, namely, Melodee.    A factor that might have influenced the final decision of the Ontario Court of Appeal was the fact that Ronald had designated Melodee as the beneficiary of his pension death benefit after he already entered into his relationship with Jennifer (but several years before his eventual death).   

This decision has caused confusion and uncertainty in the pension community.  The matter has been appealed to the Supreme Court of Canada and the Financial Services Commission of Ontario has written a formal letter in support of Jennifer’s claim.

Upon reflection, one wonders what Ronald’s true intentions were at the time of his passing.  Did he fully intend to have his former spouse and two daughters benefit from his pre-retirement death benefit (which likely was one of Ronald’s most significant assets)?  Alternatively, after having lived for several years with Jennifer, did he want his new spouse to benefit?

Ronald could have easily avoided having his family pay a huge legal bill (which continues to mount) along with a lengthy delay and numerous court battles by taking a few simple steps to clarify his intentions. For example, he could have updated his Will, his beneficiary designations, entered into a cohabitation agreement with Jennifer, etc.

As is so well portrayed in the hit television comedy series, Modern Family, we live increasingly in a world of second marriages, blended families, married and common law spouses, heterosexual and same-sex couples, etc.   Any time there has been a change in your family situation, it is essential to review all of your beneficiary designations as part of the estate planning process (retirement plans, RRSP’s, TFSA’s, insurance policies, etc.) to ensure they accurately reflect your true intentions.  This simple task could be one of the best gifts you can give to your family and loved ones.

William Hinz is an Associate at BrazeauSeller.LLP.  He practices in the areas of Tax & Estate Planning and Corporate & Commercial Law.  William can be reached at 613-237-4000 ext. 249 or  For more information about William, please visit

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