The New Brunswick Court of Queen’s Bench decision in Tower Estate v. Tower Estate serves as yet another reminder that a prescribed written beneficiary designation trumps other less specific documents purporting to revoke or substitute a named beneficiary.

In Tower Estate, the late Cedric Tower, an employee of Correctional Services Canada, was entitled to a pension and other benefits under the Public Service Superannuation Act (PSSA). While married, Mr. Tower designated his then wife, Shirley Tower, as beneficiary of his death and pension benefits pursuant to the requirements of the PSSA. The couple subsequently divorced and signed a separation agreement which purported to settle all claims between them, including claims to pensions:

8.1 The Parties agree to release any and all interest he or she may have in any pension plan held or paid into by the other; 8.5 The Parties agree to execute any and all documentation required to give effect to clause 8.

Cedric Tower did not subsequently remove his ex-wife as beneficiary of the benefits.

In advancing their claim, the Towers’ sons claimed that the separation agreement contained terms settling all issues between Mr. Tower and his former wife. As a result, they alleged that their mother was not entitled to the benefits at issue and that the benefits were the property of Mr. Tower’s estate.

In denying the sons’ claim, the Court reviewed the relevant provisions of the PSSA and held that Mrs. Tower’s designation as a beneficiary was not revoked by the separation agreement. The Court held that in order to effect a beneficiary revocation under the PSSA, it is necessary to comply with the relevant statutory requirements, which included filing a prescribed form. Relying on the reasoning in a series of life insurance cases, the Court reiterated the following:

A former spouse is entitled to proceeds of a life insurance policy if his or her designation as beneficiary has not changed. This result follows even where there is a separation agreement in which the parties exchange mutual releases and renounce all rights and claims in the other’s estate. General expressions of the sort contained in releases do not deprive a beneficiary of rights under an insurance policy because loss of status as a beneficiary is accomplished only be compliance with the legislation.

[Richardson Estate v. Mew, 2009 ONCA 403 (CanLII)]

The Court also rejected the sons’ argument that the benefits received by Mrs. Tower were subject to a constructive trust for the benefit of the estate, finding that the elements of unjust enrichment were not present. As a result, the Court concluded that Mrs. Tower was entitled to the pension and death benefits at issue.

Plan administrators should be wary of administering changes to pension plan beneficiary designations based on separation agreements containing only broad and general language releasing claims to benefits. Instead, they should ensure that plan members file the proper documentation in accordance with legislative requirements and the plan terms.