Pension and Group Insurance Beneficiaries After a Death in Ontario

When someone dies, a surprising amount of money can pass outside the will. Group life insurance through work, a workplace pension and registered plans each ask the same question: who is named on the form? That answer often matters more than what the will says.

This article explains in plain terms how these benefits are generally paid in Ontario, what happens when no beneficiary is named or the beneficiary has died, and where creditors, children and support claims fit in. Plan documents and your employer's benefits office will have the final word on your particular plan.

Two sets of rules, not one

Group life insurance is insurance, so the Insurance Act governs who can be named and how the money is paid. Pensions, RRSPs and RRIFs are treated as plans under the Succession Law Reform Act, which has its own rules for naming a person to receive the benefit on death.

A workplace pension may also have its own terms set by the plan itself. Those details depend on your plan, so ask the plan administrator and have a lawyer confirm how they apply to you.

How group life insurance is paid

The person insured can name themselves, their estate or a beneficiary to receive the money. The designation can be made in the contract or in a separate declaration. Unless the designation is irrevocable, the insured may change or revoke it at any time by a declaration.

Naming the insured's heirs, next of kin or estate counts as naming the personal representative, so the money is paid to the estate. An insurer may also restrict or exclude the insured's right to name beneficiaries in the contract.

If a named beneficiary dies first and the contract or declaration does not say who takes that share, it goes to the surviving beneficiary. Several survivors share it equally. If none survive, it goes to the insured or the insured's estate. A contingent beneficiary named in the policy is the policy's own answer for that share.

A beneficiary can enforce payment in their own name, although the insurer can raise any defence it could have raised against the insured.

Pensions, RRSPs and RRIFs

A plan participant may name a person to receive the benefit payable on death, by a signed instrument or by will, and may revoke it 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.

If the participant became incapable, an attorney under a continuing power of attorney for property, or a guardian of property, has only a limited power to make a designation when a plan is converted, renewed, replaced or transferred. Whether an attorney may otherwise change a life insurance beneficiary is not settled by a simple rule, so get advice before relying on one.

Irrevocable beneficiaries, creditors, estate and tax

A beneficiary can be named irrevocably only in the contract or in a declaration that is not part of a will, and it must be filed with the insurer while the insured is alive. While that beneficiary lives, the insured cannot change it without their consent. An attempt to do this in a will, or in an unfiled declaration, is treated as an ordinary designation that stays revocable.

Where a beneficiary is designated, the insurance money is not part of the insured's estate and is not subject to the claims of the insured's creditors. That protection applies only where a beneficiary is designated. When the money is payable to the estate it is dealt with under the will or intestacy rules, together with estate debts.

• Tax: the CRA lists most life insurance payouts after a death among amounts you do not report as income.
• Support claims: life insurance the deceased owned, plan designations and joint accounts are added back to the net estate when a court sets dependant support, so a designated beneficiary can be reached by a support order.
• Tax clearance: this relates to estate property, not to insurance paid directly to a designated beneficiary, which is outside the estate. Before distributing estate property, the legal representative should get a clearance certificate (Form TX19). Without one, they are personally liable for the deceased's unpaid tax, up to the value of the property distributed.

When the beneficiary is a child

If no one can give a valid discharge for a minor's insurance money, the insurer must pay it into court to the minor's credit within 30 days after receiving the required evidence. The insurer may instead pay the minor's guardian of property appointed under the Children's Law Reform Act.

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, and if the designation sets no trust terms, the trustee may only hold and invest the money until the child turns 18. How this works for a particular child and policy depends on the facts, so it is worth confirming with a lawyer.

What to do next

• Ask the employer's benefits office for the group life certificate and the current beneficiary designation.
• Ask the pension or plan administrator for the plan's death-benefit rules and any designation on file.
• Gather the death certificate and proof of your identity and relationship.
• Check for a later designation, since the most recent one generally governs.
• Speak to a lawyer if the form is unclear, a beneficiary has died, a child is involved, or a dependant may claim support.

Frequently asked questions