Beneficiary Designation: How It Works in Ontario

A beneficiary designation is a direction to an insurer or plan administrator about who receives money when you die. Because it is made with the insurer or plan rather than in your will, it often decides who gets the money regardless of what the will says.

This article explains the basics for life insurance and registered plans, how designations can be changed, and where they can still be challenged.

How a designation works for life insurance

The person insured can name themselves, their personal representative (estate) or a beneficiary to receive the insurance money. The designation can be made in the contract or by a separate declaration. A declaration may be provided electronically if it meets the requirements in the Authority rules.

Naming your heirs, next of kin or estate counts as naming your personal representative, so the money is paid to the estate. An insurer may restrict or exclude in the contract the insured's right to name beneficiaries, subject to the Authority rules. A beneficiary may enforce payment in their own name, but the insurer can raise any defence it could have raised against the insured.

Changing or locking in a designation

Subject to the irrevocable rules, the insured may alter or revoke a beneficiary designation at any time by a declaration. If a beneficiary is named irrevocably, the insured cannot change it while that beneficiary is living without their consent. An attempt to make a designation irrevocable in a will, or in a declaration that was not filed as required, is treated as an ordinary designation.

If a primary beneficiary dies first and the contract or a declaration does not say who takes the share, it goes to the surviving beneficiary, shared equally if there are several. If none survive, it goes to the insured or the estate.

RRSPs, RRIFs and pensions

A participant in a plan, such as an RRSP, RRIF or pension, may name a person to receive the benefit payable on their death. This can be done by signed instrument or by will, and revoked the same way. A designation in a will takes effect only if it relates expressly to a plan.

A later designation revokes an earlier one to the extent they are inconsistent, and the plan administrator is discharged by paying the person named in the latest designation made under the plan's terms. The rules for specific accounts and plans can differ, so check the plan's own paperwork.

Where a designation overrides a will, and where it does not

Where an insurance beneficiary is designated, the money is not part of the insured's estate and is not subject to the claims of the insured's creditors. By contrast, money payable to the estate becomes part of the estate and is dealt with under the will or intestacy rules, together with estate debts.

A designation in a will has no effect against a designation made later than the will. If a will containing a designation is later revoked, the designation is also revoked.

Designations are not untouchable. When a court sets dependant support, life insurance the deceased owned, plan designations and joint accounts are added back to the net estate, so a designated beneficiary can be reached by a support order.

What to do next

• List every policy and plan and check who is named on each.
• Confirm that each designation is current, especially after a separation, a death or the birth of a child.
• Check whether any designation is irrevocable, and whether your insurer has limits on naming beneficiaries.
• Name a backup beneficiary where it makes sense.
• Speak with a lawyer if a designation conflicts with your will or someone may challenge it.

Frequently asked questions