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Common law spouse vs beneficiary: Who gets the pension money?

Posted by on Dec 15, 2012 in Retirement, Smallbizadvisor | 0 comments

BY Sheryl Smolkin, lawyer and journalist | December 14, 2012

The common law spouse of a Windsor man wants to appeal an Ontario Court of Appeal decision that awarded his $1.5 million pension death benefit to his legal wife and daughters who were designated as his beneficiaries.

Previously, if a couple is no longer living together, a subsequent common law spouse is automatically entitled to the pension payout. Or so it was assumed. It’s now much more important for the pension-earning spouse to ensure that his or her survivor benefits designation reflects his actual intentions if a common law spouse comes into the picture.

The Case:

Ronald Carrigan separated from his wife Melodee in 2000 after 27 years of marriage. The couple never signed a separation agreement and remained legally married until his death in 2008. After the separation, Carrigan lived openly with Jennifer Quinn for eight years, but maintained a close relationship with his former family. In 2002, he designated his wife and daughters as the beneficiary of the death benefit under his pension plan.

The Ontario Pension Benefits Act says that a spouse is entitled to the pre-retirement death benefit unless the couple is living apart on the date of the plan member’s death. The member may designate a beneficiary who will become entitled to the benefit if he does not have a spouse when he dies. The first court case with a trial ruled that Jennifer Quinn met the definition of spouse because at the time of death she and Carrigan had been living together for eight years.

However, the Court of Appeal’s reversal of that decision was based on a technical interpretation of the statutory language that effectively subverted the original legislative intent. The judge said Quinn wasn’t entitled to the benefit because the wording in 48(3) precluded the application of 48(1) & (2) to both a legal spouse and a subsequent common law spouse. Instead, the benefit goes to the designated beneficiaries who luckily for Melodee Carrigan happen to be her and her daughters.

Major consequences

Unless the Supreme Court of Canada grants leave to appeal to Quinn, the Court of Appeal decision will stand, reversing both the law and 20-year-old practice. Even if leave is granted it could be up two years until the case is heard and the issue is resolved one way or the other. A legislative solution is a possible, but unlikely short-term fix.

How does this case affect advisors and their clients? Find out here.

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