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The Perils of Losing Your Beneficiary Designation

The recent case, Ray-Ellis v. Goodtrack,[1] serves as good reminder to be diligent about keeping track of you beneficiary designations. The applicant, Soma Ray-Ellis, and the deceased, Kirk Goodtrack, were married in 1993 and Kirk signed a beneficiary designation for his Locked in Retirement Account (‘LIRA’) in 1997, in favour of Soma. The LIRA was originally registered with Nesbitt Burns, but was moved to Midland Walwyn in 1997. When Midland Walwyn was purchased by Merrill Lynch in 1998, the LIRA passed to it. Finally it passed to CIBC in 2001 when it purchased Merrill Lynch. Soma and Kirk divorced in 2001 and signed a broad and general release. Kirk’s net family property statement listed the value of the LIRA.

In 2001, after the divorce, Kirk changed the beneficiary designation of his Maritime Life Pension Plan from Soma to his parents and there was a record of that change in the materials presented to the court. He also signed a new beneficiary designation form changing the beneficiary of the LIRA from Soma to his parents  (“the 2001 designation”). CIBC only had a record of the 1997 beneficiary designation and not of the 2001 designation. It seems that Kirk may not have sent CIBC a copy of the latter designation. CIBC did send him a blank beneficiary change form on three occasions. Kirk did not complete them, but told CIBC that he did not want Soma to be the designated beneficiary. Kirk died in 2018. His executor ultimately found a photocopy for the 2001 designation in Kirk’s files, but the original was never found.

Soma brought this application in 2019, claiming that the 1997 designation had not been revoked and that therefore she was entitled to have its value paid to her.

The court disagreed and found that the 2001 designation was valid under s. 51(1)(a) of the Succession Law Reform Act,[2] as an instrument signed by Kirk, and that its authenticity was unchallenged. It also noted that the legislation does not require that a designation be ‘registered’. The court relied on another case in which the court accepted a photocopy of a change of beneficiary form of a life insurance policy as valid.[3] Further, the court held that the 1997 designation did not survive the comprehensive release executed by the parties after their divorce. In effect, Soma had already received her share of the LIRA under that settlement. The court also relied on another case, which held that the release in a separation agreement acted as a revocation of a prior beneficiary designation of a deferred profit sharing plan.[4]

Finally, the court held that if it was wrong about the status of the 1997 designation and that it was not revoked by the 2001 designation or the 2005 release, a constructive trust should be imposed  on the LIRA, because otherwise Soma would be unjustly enriched. It relied on yet another case in which an equalization calculation included the value of the husband’s pension plan and husband paid the equalization payment to his wife from whom he was separated. After the husband died, it was discovered that he had not changed the beneficiary designation on his pension plan. The court held in that case that the wife would have been unjustly enriched if she were to be paid the survivor benefit under the plan.[5]

The take away from this case is: make sure that you not only change the beneficiary designations on you pension plans when there is a change in your marital status, but also send a copy of the change to the holder of the plan. In fact, by virtue of a 2020 amendment to s. 51 of the Succession Law Reform Act, which added subs. (1.1) to s. 51,[6] a designation and a change in designation can now easily be provided electronically in accordance with the Electronic Commerce Act.[7] Thus, participants in pension plans now really have very little reason not to be diligent

[1]    2021 ONSC 3102.

[2]    R.S.O. 1990, c. S.26.

[3]    RBC Life Insurance Company v. Monaco, 2010 ONSC 75, aff’d 2010 ONCA 855.

[4]    Burgess v. Burgess Estate (2000), 52 O.R. (3d) 61 (C.A.).

[5]    Conway v. Conway Estate, 2006 CanLII 1448 (One. S.C.J.).

[6]    See Response and Reforms to Modernize Ontario Act, 2020, S.O. 2020, c. 7, Sched. 15, s. 1. Section 2 of Schedule 15 makes a complementary amendment to s. 30.1.1(1) of the Pension Benefits Act, R.S.O. 1990, c P.8.

[7]    S.O. 2000, c. 17.

This paper is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This paper is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.

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