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Tuesday, March 30, 2010

Does my separation agreement change my Will?

When couples marry, they usually make Wills leaving their estates to each other. They also name each other as the beneficiary on life insurance policies, RRSPs and pension plans. When a couple separates on the road to divorce, they no longer want to leave everything to each other. They go through a period during which custody of the children is worked out and the assets and debts they gathered as a couple are divided between them. The end result is often a separation agreement, minutes of settlement or some other written agreement between them.

A phrase that is often used in this kind of document is a general statement that the parties release each other from all claims against each other's estates. This seemingly harmless statement has caused problems for individuals who misunderstand how it affects them. Much to the dismay and disbelief of many a spouse, this clause does NOT mean that the ex is no longer the beneficiary of the policies and plans.

The intent of the "no claims" phrase is for both parties to the agreement to indicate that they believe the property settlement in the agreement is fair and they agree to it, and as a result will not make any claims for financial support from each other's estates.

Plans and policies with a named beneficiary don't fall into your estate.

If you have named your spouse as the beneficiary of an insurance policy, RRSP, segregated funds, pension plan, ESOP, LIRA, etc, the general "no claims" language of a separation agreement will not change that. You still have to change it yourself.

The only way to use a separation agreement to change a particular plan or policy is to specifically identify that plan or policy in the agreement. For example, with a life insurance policy you would have to name the policy number and the insurance company. Even then, you would be smart to contact the insurance company, pension administrator or bank directly to make the change you want.


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