Wills and Life Insurance

Updated: Oct 9, 2019


Under Ontario law, you can designate beneficiaries to receive financial assets, including life insurance proceeds, pension plan benefits and RRSPs. However, unlike other assets, these assets are not administered by the executors named in your will and are transferred outside your estate.

You must name the RRSP, pension plan benefit, etc. specifically in your Will. Furthermore, if you enter into a new insurance policy or financial plans after you have signed your will, you must create a new will in order to designate beneficiaries for those policies or plans.

What Happens After Designation?

Life insurance proceeds will flow to the beneficiary of the policy free of tax. Since insurance proceeds are outside of the estate of the deceased, insurance proceeds paid to a designated beneficiary are not included in the value of your estate when calculating probate fees.

  • If you do not designate a specific beneficiary or if your designated beneficiary dies before you and there is no alternative beneficiary, the proceeds of your plan will be dealt with as part of your estate and will be subject to creditors' claims and probate fees as with any other part of your estate.

  • Proceeds will also be subject to probate tax if you assign your estate (rather than a specified beneficiary) as the beneficiary of your insurance policy. You may want to assign your estate as the beneficiary to ensure the proceeds are held in trust pursuant to the terms of your will and are not paid to a beneficiary outright.

Proceeds from other financial assets and plans such as RRSP and RRIF are usually included in your taxable income in the year you die, unless you have left your RRSP and RRIF to your spouse.

What is an Insurance Trust?

An insurance trust can be part of your will or outside of your will. By putting your proceeds in an insurance trust, you will avoid probate tax on the funds.

To find out more about how an insurance trust would work, feel free to contact us at wlo@wdl-law.com.

Please not, however, that the onus is on you rather than on your lawyer to make sure this beneficiary designation is completed with your Insurance Policy Provider.

Disclaimer: This blog post is for general information purposes only and is NOT intended to be relied upon for legal advice, or to be construed as legal advice. Please consult with us directly through email (wlo@wdl-law.com) for legal advice about your specific situation.

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