ENSURING CHILD SUPPORT IF PAYOR DIES TOO SOON
What happens when the child support payor dies before the child support obligation ends?
If the Ontario Court of Justice orders child support, the deceased payor’s ongoing child support obligation attaches to his or her estate. For example, a Father is ordered to pay child support but dies when his daughter (support recipient) is 8 years old. Before any of the beneficiaries receive money, the executor or executrix must first give the daughter’s guardian (likely daughter’s mother) a lump sum amount that is equal to the present value of the future child support payments. This amount would be an estimate, of course. The beneficiaries get to apportion the remainder of the Father’s estate.
If the matter I brought before the Superior Court of Justice, however, future child support payments do not attach to the diseased payor’s estate. In this case, the daughter would be left with nothing. What should be done?
Frequently, the court orders that the payor obtain a life insurance policy with the spouse as beneficiary. The policy payout should be the net present value of the future child support payments.
The recent case of Katz v. Katz 2014 ONCA 606 provides some guidance. The full text can be found here.
The Ontario Court of Appeal examined the issue of life insurance to cover the cost of future child support payments. The Honourable Janet M. Simmons, who wrote the majority opinion, summarizes the law in these paragraphs:
In my view, therefore, the same power that exists under the Family Law Act [Ontario Court of Justice] to order a spouse to obtain insurance to secure payment of support payments that are binding on the payor’s estate also exists under the Divorce Act [Superior Court of Justice].
That said, where there is no existing policy in place, a court should proceed carefully in requiring a payor spouse to obtain insurance. This case demonstrates the desirability of having evidence of the payor’s insurability and of the amount and cost of the available insurance. Careful consideration should be given to the amount of insurance that is appropriate. It should not exceed the total amount of support likely to be payable over the duration of the support award. Moreover, the required insurance should generally be somewhat less than the total support anticipated where the court determines that the recipient will be able to invest the proceeds of an insurance payout. Further, the amount of insurance to be maintained should decline over time as the total amount of support payable over the duration of the award diminishes. The obligation to maintain insurance should end when the support obligation ceases – and provision should be made to allow the payor spouse to deal with the policy at that time. Finally, when proceeding under the Divorce Act, the court should first order that the support obligation is binding on the payor’s estate.