Survivor Benefits – Are You Entitled After a Divorce?

Family Law

Many separation agreements contain mutual waivers of interest in the pensions of the parties involved. What they frequently don’t contain is a discussion about the survivor benefits, which are a different and separate matter.Put simply, her waiver in the other’s pension was effective so long as her former husband was alive, but as soon as he was dead, the statutory mechanisms which gave her a survivor benefit kicked into place.

The Court of Appeal recently ruled, in a decision under the Family Relations Act, or FRA (Tarr Estate v. Tarr, 2014 BCCA 315) that a separation agreement merely waiving interest in pensions did not, in fact, waive an interest in the survivor benefits, and so the former spouse was allowed to continue to receive survivor benefits in spite of the fact that she had signed away any interest in the other person’s pension.

What the Court of Appeal also did, helpfully, was lay out how to avoid this result under both the Family Law Act (FLA) and the former FRA. Noting that a waiver of survivor benefits required explicitly dealing with the survivor benefits, they observed that under the FRA, a waiver would have to refer to those benefits specifically under s. 36(4) of the Pension Benefits Standards Act, or PBSA, or would require the proscribed form (Form 2) to be completed under s. 35(4). Either would need to be done and delivered to the administrator prior to the commencement of the pension, with the form having to be delivered within 90 days prior to commencement, and the separation agreement at any time prior to commencement.

Under the FLA, the current legislation, Form P5 from the Division of Pension Regulation would need to be filled out. This form can only be submitted after the pension has commenced—there would also need to be some corresponding agreement about who the funds were to be paid to. As this form does not actually enable the pension administrator to pay those benefits to someone other than the surviving spouse anyway, there may also be tax consequences which are extremely difficult to predict, so any incentives for a spouse to sign this form would have to be quite generous, given both the amount of survivor benefits, uncertain tax consequences, and responsibility on the spouse to then transfer those amounts.

Spouses should be very cautious about the circumstances in which they agree to sign this form, and should definitely obtain legal advice beforehand to make sure they understand what their obligations are and have some idea of what the tax consequences might be.

Contact one of our Family Law lawyers for more information.