How to Secure Support Obligations in Family Law
Introduction
Support obligations in family law are commonly secured by life insurance policies. However, there are situations where obtaining insurance may not be feasible for the support payor due to eligibility issues or prohibitive costs. In such instances, alternative methods for securing support have to be considered. This blog post will provide a detailed discussion on several alternatives: life insurance, first charge on the payor’s estate, pension or RRSP beneficiary designation, money held in trust, a letter of credit, and a conditional lien against property.
Life Insurance
Life insurance is the most frequently utilized form of security in both court orders and negotiated agreements. If the payor possesses a life insurance policy, the court can mandate a change in the beneficiary designation to secure the recipient spouse's right to obtain spousal support. The court also has the authority to order a spouse to acquire an insurance policy to secure support payments, as established by the Court of Appeal decision in Katz v. Katz. Additionally, the court can order the insurance to be maintained and can make orders regarding the amount of support to be designated for the recipient spouse's benefit.
First Charge on Payor’s Estate
In scenarios where the payor spouse is unable to obtain life insurance, an alternative is to agree to a lien and first charge against the payor spouse’s estate. This arrangement allows the recipient spouse to seek continued periodic support payable by the payor spouse's estate or a lump sum in satisfaction of their claim, provided that the estate is liquid at the time of the payor's death. While life insurance is the preferred option, this method serves as a viable alternative when obtaining life insurance is not possible.
Pension or RRSP Beneficiary Designation
Designating the recipient spouse as a beneficiary of the payor's pension or Registered Retirement Savings Plan (RRSP) is another way to secure support payments. This method can be advantageous as it allows the recipient spouse to directly receive funds from the payor's retirement savings, thereby providing a level of financial security.
Money Held in Trust
Holding money in trust is another alternative for securing support. In this arrangement, funds are set aside in a trust account, which can be drawn upon to meet the support obligations. This method provides an additional layer of security as the funds in the trust are specifically earmarked for support payments.
Letter of Credit
A letter of credit from a financial institution can also serve as a form of security for support. The bank promises to pay a set amount to the recipient spouse if the payor spouse fails to meet their support obligations. This arrangement can provide reassurance to the recipient spouse that the support payments will be made as agreed.
Conditional Lien Against Property
A lien against a property owned by the payor spouse can also be an effective method to secure support. The lien entitles the recipient spouse to claim a specified amount from the sale proceeds of the property if the payor spouse defaults on their support obligations.
Conclusion
While life insurance remains the most prevalent method of securing support obligations in family law, it's crucial to be aware of the various alternatives. These alternatives, such as first charge on the payor’s estate, pension or RRSP beneficiary designation, money held in trust, a letter of credit, and a conditional lien against property, can provide the necessary financial security when life insurance is not an option. Consulting with a family law professional can help to understand the most suitable options based on your unique situation.
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