Life Insurance and Beneficiaries When You Divorce in Ontario

You are separated or heading toward divorce, and somewhere in a drawer or an online account there is a life insurance policy that still names your spouse. Many people ask the same questions: does divorce cancel that designation, does it also undo a will, and what do I have to do myself?

This article explains the timeline of separation and divorce in Ontario, why you should not rely on automatic changes, and how to build a simple checklist for updating your paperwork. The effect of divorce on a particular will or beneficiary form depends on the document, its wording and when it was signed, so a lawyer should confirm your specific situation before you change or leave anything alone.

Does divorce automatically change a beneficiary?

It is risky to assume so. A beneficiary designation is a separate instruction that you or your spouse gave to an insurance company, an employer or a financial institution.

The way wills, insurance designations and registered accounts are affected by separation or divorce can differ from one document to the next. Some questions also depend on whether you were still married, separated or divorced on a particular date. Because the answer turns on the exact wording of each document, the safest approach is to treat every designation as something to review rather than something that has been taken care of.

There is also a practical point. If a person dies while an old designation is still in place, sorting out who is entitled can be slow, stressful and expensive for the family. Updating the form while you are alive is usually far simpler than arguing about it afterwards.

Separation, divorce and why the dates matter

In Ontario the only ground for divorce is breakdown of the marriage, which is established where the spouses have lived separate and apart for at least one year immediately before the divorce is decided. Spouses are treated as having lived separate and apart for any period when they lived apart and at least one of them intended to live separate and apart from the other.

A short attempt at reconciling does not necessarily restart the clock. The one-year period is not interrupted if the spouses resumed living together for periods totalling not more than 90 days and the main purpose was reconciliation.

Once a judge grants a divorce, the order is effective 31 days after it was made. That means there are at least three stages in which an old designation could matter: while you are together, while you are separated and still legally married, and after the divorce takes effect.

• Before separation: the designation reflects your original plan as a couple.
• After separation but before divorce: you are still married, so changes should be made with advice and with attention to any agreement or court order.
• After the divorce is effective: review everything again and confirm each document is consistent with your new situation.

Why insurance often belongs in your separation negotiations

Before granting a divorce, a court must be satisfied that reasonable arrangements have been made for the support of any children of the marriage. A court may also order a spouse to pay child support. In deciding spousal support, the court looks at each spouse's condition, means, needs and other circumstances, including the length of cohabitation, what each did during the relationship, and any order, agreement or arrangement relating to support.

Because support obligations can last for years, some separating spouses want to talk about how those obligations would be protected if one of them died. Whether insurance is the right tool, and who should be named, is a matter for negotiation or for a lawyer's advice on your facts. If you change a designation first and tell no one, it can create conflict later, especially if you are already bound by an agreement or an order.

A checklist for reviewing your designations

Start by finding every document that names a person to receive money or property if you die. Insurance is the obvious one, but people often forget workplace benefits, registered accounts and older policies bought years ago.

• Collect each life insurance policy, including any group coverage through work.
• Write down who is currently named as beneficiary and whether the designation is revocable.
• Locate your will and note who is named to receive property and who is named as executor.
• Find any pension and registered account statements and see who is named.
• Read your separation agreement or any court order for terms about insurance or support.
• Ask whether you must tell your spouse, or get consent, before you change a designation.
• Keep dated copies of every change you make and the insurer's confirmation.

What to do next

Do not rush to change forms on your own during a dispute, and do not leave them untouched either. Get your list together, then speak to a family lawyer, and where a will is involved a wills and estates lawyer, about what applies to your documents and when to update them.

If your separation agreement or a court order says something about insurance or support, follow it exactly. If it says nothing, ask whether it should. Once the divorce is effective, go back through the list, update what needs updating, and store the new documents where your family can find them.

Frequently asked questions