Litigation, Succession, Taxation law

More traps for the unwary: Life income funds and freedom of willing: who gets the money?

Feb 22nd, 2019

By Barry Landy

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In the recent case of Trachy v. BMO Nesbitt Burns [2019] QCCS 213, the children of the deceased took the position that the balance of a life income fund, an amount of $1.5 million, devolved to them as part of the mass of an estate, and did not devolve to the surviving spouse, regardless of the terms of the life income fund contract which provided that on death, the funds were left to the surviving spouse.

They argued that under the Quebec Supplemental Pension Plans Regulation, replacement of the pension referred to in section 92 of the Act by a life pension is only authorized where the provisions of the contract establishing the life income fund are in conformity with the standard contract previously registered with Retraite Quebec and that only where the purchaser who is a former member or a member dies before conversion of the total balance of the life income fund into  a life pension, would his spouse or failing that his successors be entitled to a benefit of which the amount is equal to the balance.

Section 92 of the Act provides that every member or spouse who has become entitled to a pension under a pension plan is entitled under conditions prescribed by regulation to replace the pension by a life pension or temporary pension purchased under a contract, the amount of which may vary each year. The pension may also, in cases determined by regulation, be replaced by a lump-sum payment.

In short, said the children, where the life income fund was not converted into a life pension by the deceased prior to his death, but rather was transferred into a life income fund, this asset was not an asset governed by the Supplemental Pension Plan Act and Regulation and therefore fell into the mass of the estate, regardless of the terms of the life income fund itself.

The Court held this was not the case and that whether the funds were invested in either a life income fund or a pension fund by the deceased, the funds were always subject to the terms of the life income fund contract itself and accordingly devolved to the surviving spouse.

It should be noted that in the will of the deceased, the surviving spouse was the particular beneficiary of a legacy of $325,000. Did the deceased also intend to leave his spouse a further amount of $1.5 million or did he mean to leave that amount to his heirs? The family will never know, but the legacy of the litigation, the fight between children and surviving spouse, will surely leave lasting scars.

 

This publication is of a general nature, is as of the date indicated and is not intended to constitute an opinion or legal advice. The facts and circumstances of your particular situation should be specifically identified and addressed before appropriate legal advice may be given.