Missing Life Insurance Beneficiary: How to Find and Pay Them

Someone has died, and the life insurance policy names a beneficiary nobody can find. Perhaps it is a former partner, a distant relative or a friend who moved away. You want to know whether the money is stuck, how long it will be held, and who gets it if the person never turns up.

This article explains how designations work in Ontario, what happens in a few common situations, and where the answer depends on facts a lawyer or the insurer must confirm.

Who is entitled to the money

The death benefit goes to the person named as beneficiary. If more than one is named, the insurer divides the benefit in the proportions the policyholder assigned. If no one is named, the benefit defaults to the policyholder's estate.

Under the Insurance Act, an insured designates a beneficiary in the contract or by a declaration, and may alter or revoke the designation by a declaration, subject to section 191. This matters because the policy, not the will, usually controls who is paid, so look at the policy and any later declarations before anything else.

Revocable and irrevocable designations

A revocable beneficiary can be changed at any time without telling them, while for an irrevocable beneficiary the policyholder needs that person's written permission to make a change. An irrevocable designation is made in the contract or in a declaration filed with the insurer at its head or principal office in Canada during the insured's lifetime. After that, the money does not form part of the insured's estate.

If the filing rules were not followed, the designation has the same effect as if it had not been made irrevocable. So a claim that a missing person was irrevocably named only matters if the requirements were met.

What if the named beneficiary has died or cannot be found

These are two different situations. If the beneficiary died before the insured and the contract or declaration makes no disposition of the deceased beneficiary's share, the share is payable to the surviving beneficiary, or to the surviving beneficiaries in equal shares if there is more than one. What happens if no beneficiary survives is a point to confirm with a lawyer.

If the beneficiary is alive but untraceable, the answer is less straightforward. How long an insurer must hold the funds, and what happens afterward, depends on the contract and the insurer's procedures, so ask the insurer in writing and have a lawyer confirm the rules. Do not assume the money passes to the estate or to other family members. Unclaimed bank balance rules, where balances inactive for 10 years move to the Bank of Canada, apply to bank accounts and should not be assumed to apply to insurance.

Minors and trustees

If the missing beneficiary is a child, special rules apply. An insured may appoint a trustee for a beneficiary in the contract or by declaration, and a payment to the trustee discharges the insurer to the extent of the payment. A named trustee should get a copy of the signed beneficiary designation form from the insurer, which sets out whether the trustee can pay the child and when the money must be paid out. With no trust terms, the trustee may only hold and invest the money until the child turns 18.

If a minor is a beneficiary with no trustee named, amounts over $35,000 are paid into court or to a court-appointed guardian of property, while under $35,000 the money can go to the parent or lawful custodian, who holds it until the child turns 18.

Tax and benefits points

Life insurance paid to a named beneficiary is a one-time, tax-free payment, and beneficiaries generally owe no income tax on the death benefit. Income earned on the money afterward, such as interest, is taxable. If the estate is the beneficiary, the money is distributed under the will and can be exposed to estate taxes and creditors' claims.

Employer death benefits are different: up to $10,000 of the total is exempt, and amounts above that are generally taxable to the recipient. If the beneficiary receives ODSP, life insurance payments count toward the $10,000 gift and voluntary payment limit per 12 months, and ODSP must be told about money received.

What to do next

• Get a copy of the policy and any beneficiary declarations or changes.
• Write to the insurer asking how it is searching and how long it will hold the funds.
• Gather the missing person's full name, date of birth and last known contacts to help the search.
• Check whether the beneficiary is a minor, and whether a trustee was named.
• Speak with a lawyer if the insurer will not pay, a dispute arises, or someone claims the money.

Frequently asked questions