Reliable and Enforceable Funding of a Support Obligation After Death

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  • March 20, 2017

Being a party to a separation agreement may require you to secure a child or spousal support obligation in a manner which is reliable and enforceable in the event that one former spouse predeceases the other before the support obligation terminates. There are a number of options to fund a contractual support obligation. Two common options are the inclusion of a specific provision in a Will or the obtaining and maintaining of a life insurance policy. This blog post will consider a brief survey of the two options as to their reliability and enforceability.

Provision in a Will

Reliability as security to fund a support obligation  

A former spouse being directed to secure a support obligation in their Will is required to comply with strict formal requirements in its preparation and execution. Despite these rigorous requirements, a Will can be terminated by the testator by the simple act of ripping it up without any obligation to notify the beneficiaries.

The Will may be challenged by family members who seek to set aside the distribution of assets under the Will delaying any distribution until the challenge is finally resolved.

Another disadvantage in relying on a provision under a Will is that upon remarriage of the payor former spouse, the Will may be revoked by law. To prevent such revocation, a declaration is included in the Will providing that it was made in contemplation of marriage.

Enforceability

A Will’s effect may be terminated by the testator’s creation of a subsequent testamentary instrument, which specifically and simply “revokes all Wills and Codicils previously made by me.” With no Will in effect or the existence of a Will without the requisite contractual obligation to provide security for a support obligation, the support recipient is left to commence litigation to recover from the estate of the deceased payor.

Two important clauses in the separation agreement helpful to the support recipient will a provision requiring the ‘strict performance’ of the support obligation and that the obligation is binding on the payor’s estate, heirs, administrators and assigns.

Life Insurance Policy

Reliability as security to fund a support obligation

Life insurance policies require a beneficiary designation. The designation may be revocable by a sole owner of the policy at any time without notice to the beneficiary / recipient. By making the designation irrevocable and ensuring the immediate filing of the designation with the insurer, the designation cannot be changed without notice to and written consent by the intended beneficiary.

The beneficiary of a life insurance policy upon proof of death of the policy owner will directly receive the entire face value of the policy proceeds without tax liability to the insurer’s estate. Accessibility to insurance group plans through employment may provide preliminary coverage for many families. Sometimes, parents compile a series of low-value polices to achieve sufficient coverage for long-term financial security for young children.

Enforceability

Joint ownership of the policy by the payor and support recipient with an irrevocable beneficiary designation being the recipient (or in trust for the minor children if the support is to secure a child support obligation) filed with the insurer upon the purchase of the policy will ensure that the policy proceeds will be provided to the recipient upon proof of death to the insurer.

Further, joint ownership of the policy ensures that the recipient has a right to receive directly from the insurer in a timely manner all notices, including lapse in payment of the policy premiums. In the event the payor is unable to pay the premiums, the recipient may make the payments without loss of coverage.

Careful consideration with your family and estate lawyers is critical to be fully informed of the nature and risks to fund support obligations in the event of your untimely death prior to the conclusion of that obligation.

Lorisa Stein is an experienced senior family law lawyer based in downtown Toronto, Ontario. She has utilized the collaborative method to help entrepreneurs and business families resolve their conflicts. To schedule a confidential consultation with Lorisa, fill out a request here or call her direct line at (416) 596-8081 or email her at lorisa@lorisastein.com.

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