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Ottawa, ON K2P 2H3

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Security for Support

If you are a parent going through a separation, child support is likely going to be an issue you have to resolve with your spouse. If you have an obligation to pay child support, you will also have an obligation to ensure that you have security in place should you pass away while you child or children are still minors.
Similarly, if you are required to pay support to your spouse or former spouse, you will be required to maintain security for that support. Check out our blog post on how spousal support is calculated here

Life Insurance

Life insurance is a practical way to meet this obligation for most support payors. If there is sufficient insurance in place to cover the balance of the support obligation, surviving recipients are provided for properly. Without this security in place, most support orders and agreements will be binding on the estate of the payor spouse, and support recipients will be able to make claims against the estates of payor spouses. This can be an expensive and time-consuming process for all involved.

Obligations

The right to request that a payor maintain insurance for the benefit of a child or spousal support recipient is found in section 34(1)(i) of Ontario's Family Law Act, which refers to an existing life insurance police.

Section 15.2(3) of the Divorce Act also allows a court to impose terms or conditions on an order for support as it sees fit. Section 34(1)(k) of the Family Law Act allows a court to order that support be secured "by a charge on property or otherwise." These are the provisions that allow a court to require that a payor of child support or spousal support designate the recipient as beneficiary under an existing life insurance policy.

Minor children are frequently named as beneficiaries by naming the surviving spouse as the trustee for the child. Your life insurance provider may have other rules about naming minor children, or beneficiaries in trust.

Complexity

The requirement for life insurance can get complex: insurance requirements can be significant, often exceeding the common workplace insurance plan for twice an employee's annual salary; payors can be uninsurable for medical reasons; life insurance can be prohibitively expensive; and some insurers will not allow multiple beneficiaries, limiting a support payor's ability to provide an appropriate amount of support out of a larger policy.

Recent Case law

A recent decision by Justice Simmons of the Ontario Court of Appeal, Katz v. Katz dealt with the use of life insurance to secure support obligations. Katz involved a husband who had been ordered to secure a child and spousal support obligation by obtaining life insurance. The husband had also been diagnosed with, and treated for, cancer, which made it very difficult and expensive for him to obtain insurance. Justice Simmons confirmed that the relevant legislation allows for the court to order a payor to obtain life insurance, but the court should also have evidence of the payor's insurability and the cost of maintaining a life insurance policy. Orders requiring life insurance should also specify that the amount of life insurance required to secure the obligation will decrease over time, as the obligation decreases.

In cases in which life insurance is not available, parties sometimes agree to designate the support recipient as beneficiary of an RRSP held in the name of the payor, for example. There is always a risk with insurance, and with property, that the payor spouse will not pay the premiums, or will deplete the value of property meant to secure a support obligation. It is important to have your lawyer review the security required, whether you are the payor or the recipient, and to discuss the impact of the payor failing to maintain that security as required. Many agreements include a mechanism that will allow the support recipient to continue to monitor life insurance policies going forward, and support recipients should be vigilant about doing so.



- Jenny

Remember, everyone's situation is unique. The blogs posted on this site are informational. They are not intended to be taken as legal advice for your situation. It is always a good idea to seek professional legal advice before making any decisions related to your particular case.

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