Naming a Trustee for a Minor Beneficiary's Insurance in Ontario

If you name a child as the beneficiary of your life insurance, the money does not simply go to the child at death. A minor generally cannot give the insurer a valid receipt, and someone has to manage the funds.

Naming a trustee in your designation lets you choose who that person is. This article explains how that works, what happens if you do not, and what to think about before you decide.

Why a child's payout needs someone in charge

A minor who has reached 16 has the capacity of an 18-year-old to make and deal with insurance contracts, but this does not extend to their rights as a beneficiary. So even an older teenager is not able to simply collect a payout on their own.

If no one can give a valid discharge for the minor's insurance money, the insurer must pay it into court to the minor's credit, within 30 days after it receives the required evidence.

Naming a trustee in the designation

The insured may appoint a trustee for a beneficiary, either in the contract or by a declaration. An adult may be named as trustee of life insurance proceeds left to a child.

If the designation sets no trust terms, the trustee may only hold and invest the money until the child turns 18. If you want the child to receive money later, or want the trustee to have wider powers, the terms need to be set out clearly, and a lawyer can help you word them.

• Choose someone you trust who is willing to act and can manage money.
• Consider naming the trustee in the same document that names the child.
• Decide whether you also want a contingent (secondary) beneficiary, which is a disposition the policy itself provides.
• Tell the trustee and keep the insurer's records current.

What happens if no trustee is named

If no trustee is named, a child's share over $35,000 is paid into court and managed by the Accountant of the Superior Court of Justice until the child turns 18. A child's share under $35,000 can be paid to the parent the child lives with, or to the person with lawful custody, who holds it as guardian of property until the child turns 18.

The insurer may also pay a minor's insurance money to the minor's guardian of property appointed under s. 47 of the Children's Law Reform Act, instead of paying it into court.

Points to think about

Court-managed money is more rigid, and getting funds out for the child can take effort. A trustee gives you more control, but you are relying on one person. Naming no trustee also leaves the outcome to the size of the share and who has custody at the time.

If the money instead goes through an estate under a will, the child is paid at the age the will states, and with no will the child receives their share at 18. Where an estate trustee applies for a certificate of appointment and a beneficiary is under 18, the Office of the Children's Lawyer must be served.

What to do next

• Review who is currently named on each policy, and whether any beneficiary is under 18.
• Decide who you would trust as trustee, and whether to name a backup.
• Ask your insurer how it accepts a trustee appointment in the contract or by declaration.
• Speak with a lawyer if you want the money held beyond age 18 or used under specific terms.

Frequently asked questions