Beneficiary Designations: The Gaudio Decision

The recent decision of the Ontario Superior Court of Justice in Gaudio should be considered by anyone who is experiencing the breakdown of a relationship and is in the process of entering into a Separation Agreement and anyone who already has a Separation Agreement in place. In addition, the Gaudio case clearly indicates the importance of ensuring that you have a current Will that clearly indicates your wishes.

Francesco Gaudio and Debra Ann Gaudio entered into a Separation Agreement, in October of 2004. The contract contained provisions in which Ms. Gaudio released her entitlement to a share of her husband’s Estate and settled all claims between them.

During their marriage, prior to their separation, Francesco Gaudio designated Debra Ann Gaudio as the beneficiary of his RRSP’s and his life insurance policy. The Separation Agreement did not contain any provisions which specifically changed these designations.

Francesco Gaudio died on January 10, 2005, without a will. At the time of his death, Mr. Gaudio had not divorced, nor remarried and he had no children. He was survived by his mother and siblings.

Justice Clarke held that the provisions of the Separation Agreement did not revoke Ms. Gaudio’s right, as the beneficiary, to the proceeds of the life insurance policy. Pursuant to the Insurance Act and the Succession Law Reform Act, RRSP’s proceeds and insurance proceeds are excluded from the Estate of the deceased. As such, absent any evidence that it was the intention of the deceased to change the designations, Ms. Gaudio retains her beneficiary rights.

Note that this case was distinguished from others where there was found to be a revocation of beneficiary rights despite the lack of specific contractual provision addressing such designations. In these cases the intention of the deceased to revoke these rights was evidenced by;

  • bitterness in the relationship at the time of entering into contractual agreements;
  • remarriage;
  • witnesses who could testify to the parties intention; or
  • any indication that the parties had addressed their minds to changing the beneficiary designations.

It was found to be immaterial whether the designations remained unchanged due to error or inadvertence. In retaining Ms. Gaudio’s entitlement to proceeds of the RRSP’s and the insurance policy, Justice Clarke stated, “I accept the principle that it is my duty to construe the words actually used by the deceased and not to speculate as to what may have been in his mind.”

This case highlights the importance of ensuring your Will is up to date and that both your Will and your Separation Agreement are comprehensive and address all relevant issues.

At the time of Separation take account of all your financial and property interests. Consult a lawyer who can advise you with respect to drafting Separation Agreements and Wills, which clearly and fully designate beneficiaries according to your wishes.

In addition, if you already have a Will or Separation Agreement, it is recommended that you seek legal advice from time to time to ensure that your arrangements are consistent with changes in the law and will be enforced upon your passing.

Protect your interests and those of your loved ones through careful, comprehensive and informed Estate Planning.

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