Insurance Policy or RRSP? An Important Question
There’s an old saying that says “the devil is in the details.” This is particularly true in the case of the law. Many of our blogs cover cases before the court that attempt to dissect tiny details of a situation in order to find a path to resolution. The case covered today is no exception to this. In it, an RRSP treated by those involved as an insurance policy led to an interesting analysis by the courts.
A long marriage
The couple involved were together for 22 years and married for six before the husband died on April 5, 2011. They had a brief separation the year before the husband died, but ultimately got back together after keeping daily contact with one another during the separation. In addition to leaving his wife behind, the husband also had two adult sons who survived him.
The husband had made five testamentary dispositions in the years leading up to his death. He made his first will in March 2005, leaving his estate to the wife and naming her as the beneficiary of his RRSOP. Four years later he transferred his RRSP from TD Waterhouse to London Life Insurance Company. He named his wife the beneficiary of what was now called an investment product, or “London Life Product.” This designation will become important later on.
On March 14, 2011, during or around their separation, the husband executed a new will by which he left his entire estate to his two adult sons. One day later he signed a change of beneficiary designation with London Life, in which he deleted the wife and designated his sons as the beneficiaries of the London Life product. Finally, on March 25, 2011, he executed a last and final will (“the Will”) which left the estate to the wife. It also designated her as the beneficiary of his RRSP. However, he did not contact London Life to inform them of this change.
The question being decided by the court was who the deceased intended to be the recipient of London Life product. The court explained that in order to do that, it had to determine if there had been “sufficient revocation in the will of the beneficiary designation made on March 15, 2011 favouring the respondents, and whether there has been a sufficient designation in the will of the applicant as the beneficiary of the London Life product.”
Was it an RRSP or an insurance policy?
The sons took the position that the London Life Product was an insurance policy, which would mean “Once the deceased purchased the Freedom Funds Investment policy he no longer owned the investment funds, but rather he was the annuitant under the policy.” The court agreed that the policy is an insurance contract based on the life of the insured, and requires London Life to make a lump sum payment upon the death of the husband.
What does this mean? It means that if the London Life Product is an insurance policy, it is no longer governed by the will, since the will did not mention it.
But wait! While the will did not revoke the insurance policy designation, it did name the wife as the sole beneficiary of “…any registered retirement savings plan” funds. The court found that the London Life Product was not simply an insurance policy, but also an RRSP, writing “In the present case I conclude that the Will refers to the insurance policy. Although the specific words ‘insurance policy’ are not used, the Will refers to registered retirement savings plans. As previously pointed out, it is the nature of this insurance policy that it is also a registered retirement savings plan.”
As a result, the court determined the money from the London Life Product would be payable to the wife.
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