What is a beneficiary designation and how does it work in Ontario?
A beneficiary designation is a direction you make directly on a financial account or insurance policy naming who should receive the asset on your death. In Ontario, you can name beneficiaries on registered accounts (RRSPs, RRIFs, TFSAs), life insurance policies, pensions, and certain annuities.
When you die, assets with a named beneficiary pass directly to that person outside of your will. The executor does not administer them, and they are generally not subject to estate administration tax (probate fees). This can make the transfer faster and more tax-efficient.
A beneficiary designation is a powerful planning tool but must be kept current. If you name a former spouse, a deceased person, or a minor child as beneficiary without planning for that, the consequences can be complicated. Naming a minor child directly means the funds may be administered by the Children's Lawyer until the child reaches adulthood — which may not be what you intend. Naming the estate is an option but removes the probate-avoidance benefit.
Ontario's Succession Law Reform Act provides that a designation made in a will or on the account form governs; the will controls only if it specifically refers to the account.
Key takeaways
- Beneficiary designations pass assets directly to named individuals outside the will
- They avoid probate and can speed up the transfer to beneficiaries
- Designations must be kept current — outdated designations cause problems
- Naming a minor directly without planning can trigger court involvement