Beneficiary Died Before Receiving an Inheritance in Ontario: Who Gets the Share?

You may be reading a will and find that someone named in it has died. Perhaps they died before the person who made the will. Perhaps they died while the estate was still being settled. In either case, you will want to know where their share goes.

The answer turns on timing and on the words of the will. This article explains the general Ontario rules, the common exceptions, and the practical steps to take. A lawyer can confirm how they apply to a particular will.

Two different situations, two different rules

The first question is when the beneficiary died. Ontario treats these two situations differently.

In both cases the will's wording can change the outcome, so the will itself is the starting point.

Beneficiary died before the testator: the anti-lapse rule

Normally a gift to someone who has died before the testator would fail, or lapse. Ontario has a rule that softens this for close family. If the gift was made to the testator's child, grandchild, brother or sister, who dies before the testator and leaves a spouse or issue, the gift does not lapse unless the will shows a contrary intention.

Instead, the gift passes as though it had been made directly to the people who would share that person's estate. Issue means descendants, such as children and grandchildren.

• The rule covers only a child, grandchild, brother or sister of the testator.
• The person who died must have left a spouse or issue.
• A contrary intention in the will can switch the rule off.

If the beneficiary was a friend, a cousin or a charity, this rule does not apply on its own terms. What happens then depends on what the will says about gifts that fail, so it is worth getting advice.

Beneficiary died after the testator but before payout

Sometimes the beneficiary outlives the testator but dies before the estate is distributed. Property that vested in a person, with no right of survivorship, passes to that person's personal representative [Estates Administration Act, s. 2(1)]. A beneficiary who survived the testator therefore generally passes their share to their own estate, unless the will imposes a survivorship condition.

Look closely at the will for two things. One is a survivorship clause, which requires a beneficiary to outlive the testator by a set period, often 30 days. The other is a gift that vests only at a later age. Either can change who receives the share. The result depends on the wording, so check the will before assuming the share goes to the beneficiary's estate.

Related points that affect the share

• Former spouses: unless the will shows a contrary intention, a gift to a former spouse, and their appointment as executor or trustee, are revoked after divorce or a declaration of nullity. The will is read as if the former spouse had died before the testator.
• The estate trustee's role: estate trustees carry out the wishes set out in the will, wind up the deceased's affairs, pay taxes, bills and other debts, and then distribute the estate according to the will.
• Timing: estates are still presumed to be wrapped up within one year of death, known as the executor's year. Where an estate is not simple, the court accepts that finishing within that year may be unreasonable.
• Tax clearance: a legal representative who distributes assets before getting a CRA clearance certificate (Form TX19) is personally liable for unpaid amounts, up to the value of the assets distributed.

These points explain why a payout can take longer than expected, and why a trustee may hold back some funds until tax matters are settled.

What to do next

• Get a copy of the will and read the clauses on gifts that fail, survivorship and any conditions on age.
• Find out the date of death of both the testator and the beneficiary, since the order of deaths matters.
• Check whether the beneficiary was a child, grandchild, brother or sister of the testator, and whether they left a spouse or issue.
• Ask the estate trustee about the expected timing and whether a CRA clearance certificate is still outstanding.
• If the will is unclear or family members disagree about who should receive the share, speak with an Ontario estates lawyer.

If you are the estate trustee, you must still distribute according to the will. Getting advice before paying out can help you avoid paying the wrong person.

Frequently asked questions