Our BC family lawyers warn clients to ensure they change beneficiary designations on their pensions, life insurance, bank accounts and RRSP’s amongst other assets. What happens when someone can’t change their pension beneficiary because they made an irrevocable designation but they buy out the other spouse’s interest in same?
BC Pension division is complex and pension division agreements on marriage breakdown must be carefully drafted to avoid a huge mess on the death of a pension member. Call us at 604-602-9000 to ensure your pension entitlement is done properly.
Our Vancouver Separation Agreements and BC Pension Survivor Benefits lawyers found a great recent case that shows how important it is to properly draft a separation agreement or divorce settlement. Here’s a recent case where a pension member could not change his ex wife as a survivorship beneficiary so he made a settlement to keep all of his pension or so he thought.. The divorcing husband signed an agreement that said his pension would be his alone and he made a substantial payment to his ex-wife in exchange for the rights to his pension. He remarried and when he died the estate of the deceased plan member sued the ex wife who began collecting the pension survivorship benefits. The court ordered the ex-wife to return these death benefits but let her the RRSP from the husband as he had not changed the beneficiary status on the RRSP despite the divorce. The court used the remedy of the remedial constructive trust to ensure the terms of the separation agreement was upheld. Costs were awarded against the ex wife as the estate was the successful party in the court case.
What the Judge Said in Detail:
[9] The Estate argues the Separation Agreement was intended to be a final settlement of all the issues between the parties. The Estate says there was a clear intention on the part of the parties to waive their rights to each other’s Plan and RRSPs. The Estate points to paragraphs 25, 27 and 33 of the Separation Agreement as demonstrating this intention.
[10] The Estate submits that where the parties contemplated a future financial bond, the Separation Agreement specifically provided for it. This is evidenced through the clauses relating to spousal maintenance and life insurance. The Estate argues that if the parties intended Ms. Tarr to have a future entitlement to Mr. Tarr’s Plan or RRSPs, the Separation Agreement would have stated this intention.
[11] Finally, the Estate argues it would be inequitable to allow Ms. Tarr to collect survivor benefits under the Plan and RRSPs when she accepted an equalization payment of $250,000. The Estate says this payment was made on the representation that Ms. Tarr was releasing any claim she had against Mr. Tarr’s property, including his pension. Therefore, the Estate submits Ms. Tarr is holding the survivor benefits in the pension and the RRSPs in trust for the Estate.
[12] Ms. Tarr argues that she is entitled to retain the pension and RRSP benefits. She maintains she did not waive her right to the survivor benefits under the Separation Agreement. A waiver of survivor benefits requires a clear and express agreement to waive those rights. Ms. Tarr submits there is no such waiver in the Separation Agreement.
[13] Ms. Tarr submits that at the time the Separation Agreement was made, she already had a separate property interest in the Plan. Ms. Tarr says she has held this beneficial interest since 2002. Therefore, under the Separation Agreement, she was entitled to her own pension under the Plan and her succession benefits under Mr. Tarr’s Plan.Principles of Contractual Interpretation
[14] Interpretation of a separation agreement is subject to the same principles which are applied to other contracts. The role of the court is to determine, objectively, the parties’ intention at the time the contract was made. The court must construe the plain and ordinary meaning of the words used in the contract as a whole, aided by reference to the surrounding circumstances (or factual matrix) that existed at the time the contract was made: Athwal v. Black Top Cabs Ltd., 2012 BCCA 107 at para. 42.
[15] Only if the words viewed objectively are capable of giving rise to two or more reasonable interpretations may the court consider extrinsic evidence. In Geoffrey L. Moore Realty Inc. v. The Manitoba Motor League, 2003 MBCA 71 at para. 26, the court succinctly stated the principles as follows:
26. In brief summary then, to determine the intentions of the parties expressed in a written contract, one looks to the text of the contract as a whole. In doing so, meaning is given to all of the words in the text, if possible, and the absence of words may also be considered. If necessary, the text is considered in light of the surrounding circumstances as at the time of execution of the contract. The goal is to determine the objective intentions of the parties in the sense of a reasonable person in the context of those surrounding circumstances and not the subjective intentions of the parties. If, after that analysis, the text in question is ambiguous, extrinsic evidence may be considered.Issue 1: Did the parties intend Ms. Tarr to waive her rights to Mr. Tarr’s pension survivor benefits under the Separation Agreement?
[16] Paragraphs 11 and 12 of the Separation Agreement are the provisions that specifically deal with the parties’ pensions. Paragraph 11 states that each party shall retain for his or her own use absolutely, free of any claim by the other, pension and pension rights currently in his or her own name as referred to in the parties’ respective Form 89 Financial Statements.
[17] Paragraph 11 makes it clear that the parties intended to retain their own pension rights post-separation, free from any future claims from one another. It provides that a party’s current pension rights are those rights referred to in the party’s Form 89 Financial Statement. As previously mentioned, Mr. Tarr’s Financial Statement listed his interest in his pension as an asset. Although Ms. Tarr did not list her pension as an asset, it was referenced in the Financial Statement under her income stream. Notably, Ms. Tarr did not reference her survivorship interest in Mr. Tarr’s pension anywhere in her Financial Statement. If, as Ms. Tarr suggests, the parties intended Ms. Tarr to retain her separate survivorship benefit in Mr. Tarr’s pension, one would expect that interest to be listed in Ms. Tarr’s Financial Statement. In fact, the language of paragraph 11 requires it to be listed.
[18] In paragraph 12 of the Separation Agreement, the parties further clarify their intentions in relation to pension and pension rights. It provides that Mr. Tarr shall retain for his own use absolutely, free of any claim by Ms. Tarr, his own pension and benefits under the Plan. A similar provision is made for Ms. Tarr and her pension and benefits under her Plan. It is important that the language refers to Mr. Tarr’s pension and benefits. Survivorship rights are clearly a benefit under a pension plan.
[19] Without reference to the whole of the Separation Agreement, I would conclude that the language in paragraphs 11 and 12 of the Separation Agreement is clear and unambiguous. The parties intended that Mr. Tarr would retain any rights to his pension and survivorship benefits post-separation.
[20] However, a contract is to be construed by reference to the entire agreement. When I look at the other provisions in the Separation Agreement, the intention expressed in paragraphs 11 and 12 is reinforced. Numerous other provisions of the Separation Agreement support this conclusion:
- Paragraph 25 states the parties release each other of claims relating to property, spousal support and succession rights.
- Paragraph 26 states that the estate of a deceased party will be distributed as if the surviving party has died first.
- Paragraph 27 provides that the agreement is a full and final settlement of all issues between the parties and all rights and obligations arising out of their relationship. Where the parties intended future financial obligations between them (e.g. spousal support and life insurance as security for that support), they specifically provided for those continued obligations in the Separation Agreement.
- Paragraph 28 provides that each party will forthwith discharge any liens or claims placed against the property of the other party, whether such lien or claim is against land, pensions or other property. In 2006, Ms. Tarr made a claim against Mr. Tarr’s pension pursuant to the Family Relations Act, R.S.B.C. 1996, c. 128.
- Paragraph 17 required Mr. Tarr to pay Ms. Tarr $250,000 “to equalize the division of their family assets”.
[21] Ms. Tarr argues that she did not expressly waive her entitlement to the survivorship benefits in the Separation Agreement. I do not agree. The words and intention of the Separation Agreement are clear and unambiguous. The Separation Agreement clearly provides that Mr. Tarr will retain his pension and the benefits arising out of his pension post-separation, just as it provides for Ms. Tarr to retain her pension and benefits. Both parties obtained independent legal advice and signed certificates acknowledging the receipt of such advice. [22] Having concluded that the Separation Agreement is unambiguous I need not consider any of the extrinsic evidence to which the parties referred.
[23] It is settled that a pension administrator cannot change the joint life beneficiary of a pension post-commencement. However, that does not mean a beneficiary’s entitlement is absolute. A beneficiary can agree to waive their survivorship benefits. In such instances, the court can make an order that the beneficiary is not entitled to survivor benefits and has a duty to hold such benefits in trust for a newly designated beneficiary: Wice v. Wice, 2009 BCSC 655.
[24] In Wice, an application to have the survivor benefits held in trust was brought by the pensioner who was still alive. That fact does not distinguish the decision from the circumstances in the present case where Ms. Gabelmann seeks to have the benefits paid to her, through Mr. Tarr’s estate. If Mr. Tarr had not begun to receive pension benefits, he would have been in a position to change beneficiaries. He presumably did not see any need to bring the Plan administrator to court to change the beneficiary when he was still living as he had entered into the Separation Agreement, to resolve the question as to Ms. Tarr’s relinquishment of any such claim. In both Wice and the present case, the need to change the beneficiary of the survivor benefits came about after commencement of the pension benefit. In these circumstances a remedial trust order is required to effect Mr. Tarr’s intentions just as it was required in Wice to effect Mr. Wice’s intentions. [25] In Roberts v. Martindale (1998), 162 D.L.R. (4th) 475 (B.C.C.A.), the court applied the doctrine of a remedial constructive trust in circumstances where a spouse had surrendered, through a separation agreement with his former spouse, any right to the property of the deceased. Mr. Martindale took the position he was entitled to receive the benefits under a life insurance policy held by his former spouse. The evidence established that the deceased (and her sister, the intended beneficiary) believed, erroneously, that she had taken all steps required to change the designated beneficiary. The court concluded at paras. 26 and 27: But I am comfortable in this case in saying that it would be against good conscience for the appellants to keep this money because Mr. Martindale had, by the separation agreement, surrendered any right he might have had to the property of the deceased…. For the appellant, Mr. Martindale, to claim from the insurer the proceeds was a breach of the separation agreement and such a breach is sufficient, in my opinion, to call in aid the doctrine of the remedial constructive trust.
[26] In the present case, by virtue of the Separation Agreement, Ms. Tarr relinquished her rights to any survivorship benefits arising out of Mr. Tarr’s pension. In breach of her agreement, Ms. Tarr has retained the survivor benefits. That breach is sufficient to require the use of the doctrine of a remedial constructive trust in order to enforce the bargain reached by the Tarrs.
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