The article discussed a brand new case from Ontario called Bormans v Bormans. In this case, Mr. Bormans passed away with no assets in his estate. He had left a life insurance policy to his adult daughter, and the proceeds were paid to her.
As with every case before the courts, the facts must be looked at in detail, as they make all the difference in what the judge deems to be the right decision. The facts in this case included that Mr. Bormans owed arrears of support payments to his former wife. As part of his settlement with her, he had warranted to her that he had a life insurance policy naming her that would make sure she received any amount still owing when he died. As it turns out, he had cancelled the policy naming his wife, and had bought a new one naming his daughter.
Another important fact was that Mrs. Bormans had given the daughter notice that she was bringing a claim for dependent's relief against the estate. Dependent relief claims can be brought in all provinces by a spouse or other dependent who is not left a sufficient amount of the estate. Despite the notice, the daughter spent most of the money.
The judge relied on Ontario's Succession Law Reform Act in deciding that in dependent relief matters, life insurance could be used if other assets were insufficient.
This means that the daughter was ordered to pay most of the insurance proceeds to Mrs. Borman. Because she had already spent most of it, the daughter had to come up with other funds to pay this debt.
Lesson to be learned: don't ignore notices from the court that say you might not get to keep the money.
You can read the Bormans case in its entirety here.