Naming a Minor as Beneficiary in Ontario: What Parents Get Wrong (and How to Fix It)

When a new baby arrives, updating your life insurance and RRSP beneficiary forms feels like an obvious and responsible thing to do. You want your child to be protected if something happens to you — so you write their name on the form. Done, right?

Not quite. In Ontario, naming a minor child (anyone under 18) directly as a beneficiary can lead to an outcome that is the opposite of what you intended: the money ends up frozen in a government-managed account, potentially inaccessible for years, and then handed over in a single lump sum the moment your child turns 18. No conditions, no guidance, no gradual release.

This article explains how that happens, why so many well-meaning parents are caught off guard, and what you can do instead to make sure your money actually protects your child the way you want it to.

Why Minors Cannot Receive Large Sums Directly

Ontario law treats anyone under 18 as legally incapable of managing property above a certain threshold. This isn't a judgment — it's a protective rule that prevents a child from being overwhelmed by financial decisions they're not yet equipped to make.

The practical result: if a life insurance policy, RRSP, TFSA, or will leaves a significant amount directly to a minor, the financial institution or estate cannot simply hand over the funds. Provincial law requires that money to be managed by a trustee. If you haven't named one, the default trustee steps in — and that default is the Office of the Public Guardian and Trustee (PGT), an Ontario government office.

This kicks in whether the money comes from:

• A life insurance policy naming the child as beneficiary
• An RRSP or RRIF with the child as direct beneficiary
• A TFSA naming the child
• A will that leaves a gift to a minor outright, with no trust created

What Actually Happens: The PGT Process Step by Step

1. You die. The insurance company, financial institution, or estate executor discovers the beneficiary is a minor.
2. The funds cannot be released to the child directly. The payor must apply to the PGT or to court for direction.
3. The PGT takes custody of the funds on the child's behalf and places them into a government-managed account. The PGT charges administration fees — reducing the amount available to your child — and those costs are ongoing.
4. You lose control of how the money is invested. The PGT follows its own conservative investment rules. Your child doesn't benefit from personalized investment decisions.
5. The trustee you imagined — perhaps a surviving spouse, grandparent, or trusted sibling — has no legal authority over this money unless they successfully apply to court. Even then, the PGT may remain involved.
6. Access is restricted. A surviving parent or guardian can apply to the PGT for funds to cover the child's reasonable needs, but this involves paperwork, justification, and delay. It is not a simple process.
7. The child turns 18. The entire remaining balance is paid out in a single lump sum — no conditions attached. An 18-year-old who has just lost a parent could suddenly receive a large sum of money with no built-in guidance or graduated release.

That last point surprises many families. The PGT process was designed to protect minors, but it ends abruptly at the legal age of majority, which doesn't automatically coincide with financial maturity.

The Alternatives: How to Do This Right

Testamentary Trust in Your Will

The most common and practical solution for most families is a testamentary trust — a trust created inside your will that takes effect when you die.

Here's how it works: instead of leaving money outright to your child, your will creates a trust and names a trusted adult (often a spouse, sibling, or close friend) as the trustee. You write the rules yourself: when the child can access income, at what ages capital is released (for example, one-third at 21, one-third at 25, the rest at 30), and what the money can be used for in the meantime (education, housing, medical needs, and so on).

A testamentary trust lets you:

• Choose who manages the money instead of defaulting to the PGT
• Set your own timeline for when and how your child receives funds
• Give the trustee flexibility to respond to your child's actual needs as they grow
• Minimize court involvement by establishing the framework in advance

For life insurance policies and registered accounts (RRSPs, TFSAs), a testamentary trust alone isn't enough — you also need to update your beneficiary designations so those assets flow to your estate (and then into the trust) or to a named trustee directly. Your lawyer and financial advisor should coordinate this.

Inter Vivos (Living) Trust

If you have a larger estate or want the trust structure in place during your lifetime, an inter vivos trust (a trust created while you are alive) is another option. This can be useful if you have complex assets, multiple children with different needs, or a blended family situation. Inter vivos trusts involve more setup and ongoing administration than a testamentary trust. A wills and estates lawyer can help you weigh whether the added complexity is worth it for your situation.

Henson Trust for a Disabled Beneficiary

If your child has a disability and receives — or may one day receive — Ontario Disability Support Program (ODSP) benefits, the stakes are even higher. A direct inheritance can disqualify them from ODSP by pushing their assets above the allowable limit.

A Henson trust is a specialized absolute discretionary trust designed to hold funds for a disabled beneficiary without affecting their government benefits. Because the beneficiary has no guaranteed right to any specific payment — the trustee decides when and how much to distribute — the assets in the trust generally do not count as the beneficiary's property for ODSP purposes.

If your child is eligible for the Registered Disability Savings Plan (RDSP), that is also worth exploring with a financial advisor. An RDSP can receive contributions and may generate government grants and bonds, making it a powerful long-term savings vehicle for disabled individuals. Tax implications should be reviewed with an accountant — they fall outside what a wills and estates lawyer advises on directly.

Frequently asked questions