Here's an interesting little case dealing with an insurance beneficiary designation in a will: Petch v. Kuivila.
Richard Petch bought an insurance policy. In 2003, he made a revocable designation of his sister, Heather, as beneficiary under the policy. Such a designation can be revoked by a subsequent written instrument - say, in a Will.
In 2004, Richard made a Will, making Heather the estate trustee together with his partner, Mary, and designating Mary and his son Dustin as beneficiaries of the insurance policy.
In 2008, he married Mary. Two years later, he passed away.
Here's a legal reality in Ontario which really should be more widely known than it is, so let's put it in big bold print:
In Ontario, a Will is revoked by marriage.
That's putting it simply. There's an exception for "wills made in contemplation of marriage". So if I'm engaged to be married, and I make a Will that expressly refers to the engagement and that this will is made in contemplation of my approaching marriage to a particular person, that Will will probably survive. In other words, if you're planning to get married, you and your spouse both need to go talk to a lawyer (or more than one lawyer) to have new Wills prepared.
(Contact me if you need Wills and/or Powers of Attorney. For simple Wills, I am quite capable of assisting personally, and some of my Associates regularly provide more complex Will services, including multiple Wills to deal with non-probate assets.)
Richard's Will was not made in contemplation of marriage, so was revoked in 2008 when he married Mary. He didn't make a new Will afterwards, so died "intestate" - without a Will. The result isn't horrible, under the circumstances: It means his estate gets divided in a particular fashion as between his spouse and - perhaps - his child.
But what about the proceeds of the life insurance policy? Aye, there's the rub, for in that sleep of death what litigation may come when we have shuffled off this mortal coil must give us pause.
The designation in his Will had the effect of revoking his prior designation. That's relatively straightforward. The marriage subsequently revoked his Will. That's also straightforward. But when you revoke the Will, does that undo its revocation of the prior designation, leaving intact Heather's designation as beneficiary? Or does the policy simply no longer have a designated beneficiary, meaning that its value would be paid into the estate (and divided up, again, among his wife and child)?
The Court came down on Mary's side, and rightly. While a Will is considered to "speak from death" - i.e. it is deemed to be the testator's intention the moment before death - the beneficiary designation is treated as a separate declaration, becoming effective the moment the Will is signed. (This interpretation has arisen from cases where somebody makes a Will, then subsequently changes the beneficiary designation in the insurance policy. The Courts respect the subsequent designations. However, its application here is fairly simple.) This means that the new designation, even though revoked together with the rest of the Will, permanently and completely revoked the prior designation. The prior designation cannot be restored by a revocation of the revocation like some sort of palimpsest.
Wills and Estates law is rife with bright-line rules and strict interpretations, particularly in Ontario. In this case, it looks like the Court's interpretation renders the just result, the result that accords with what the testator would have intended. However, there could be other scenarios where it could be less favourable. There are major advantages to beneficiary designations, because they mean that the proceeds never form part of the Estate. It's a contract with the insurance company to pay a third party, and therefore somebody with a claim against the Estate can't go after the insurance proceeds. (There are narrow exceptions to this, of course.)
This is why it is extremely important to talk to a lawyer about your estate planning. I've seen awful cases where self-drafted Wills were improperly executed, resulting in a markedly different distribution of the estate; where people tried to edit their own Wills, resulting in the need for expensive Court applications for judicial guidance; etc. Estate planning is absolutely an area of law where a stitch in time saves nine.
This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.