What happens if I name a minor child as beneficiary of my RRSP or insurance?
If you name a minor child (under 18 in Ontario) directly as a beneficiary of an RRSP, RRIF, TFSA, or life insurance policy, the money cannot simply be handed to them when you die. Financial institutions will not pay a large sum directly to a minor.
Unless you have made other arrangements, the funds will likely be paid into court and administered by the Office of the Children's Lawyer until the child reaches age 18. At that point, the child receives the entire amount outright. Many parents and grandparents find this outcome unsatisfactory — they would prefer a trustee to manage the funds wisely over time, with the ability to use them for education or other needs before age 18.
A better approach is to either: (a) name a trusted adult as trustee to hold the funds for the child under a trust arrangement (the designation form or a separate trust document can specify this), or (b) designate a testamentary trust in your will and direct the registered account proceeds there — though using the estate route means probate applies.
If your children are beneficiaries of your estate under your will, a well-drafted will can include a holding trust for their share until they reach an age you specify.
Key takeaways
- Funds payable to a minor cannot be paid directly — court administration may result
- The Office of the Children's Lawyer may control the funds until the child turns 18
- Naming a trustee or using a trust arrangement gives you more control
- A well-drafted will with a children's trust is often the better long-term solution