A fellow named James had a group life insurance policy at work worth $55,000. He designated his common-law wife, Janet, as the beneficiary. A few years later, he and Janet split up. Janet married someone else.
James later entered into a new common law relationship with Michelle. James designated Michelle as the beneficiary of most of his work benefits, including dental and medical. He even took out life insurance on the lives of Michelle and their kids. On the life insurance form, James stated that Michelle was his spouse, and filled in everything except the "beneficiary designation" box. In other words, he failed to change the beneficiary from Janet to Michelle.
James died 13 years after he and Janet split up. He was still common-law with Michelle when he died. There is no question that Michelle was his current spouse. Michelle assumed that she would get the life insurance money, but the forms that James signed said to pay it to Janet. The insurance company paid the insurance money to the court (this is standard procedure when it's unclear who gets the money). That left it up to the court to decide.
The judge said that Janet, the first common law, would get the insurance money because James had not made a change of beneficiary. Michelle appealed to the Manitoba Court of Appeal. The higher court agreed with the first judge that the money would go to Janet.
This decision isn't an anomaly by any means. When a person wants to change his or her beneficiary, it's essential that the decision be clearly set out so that when the person is gone, the intentions are there for all to see. In a case like James', it's possible that he intentionally left the box blank so that he could leave funds to Janet.
However, the case does illustrate how thorough and careful you must be when setting up documents that will operate when you're no longer around to explain your intentions.
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