Revocable Beneficiary: What You Can Change in Ontario

If you own a life insurance policy, you may have named someone to receive the money years ago. Families change, and many policyholders want to know whether they can simply update that choice.

In Ontario, a revocable beneficiary is the usual kind of designation, and it is flexible. This article explains what you can change, where the limits are and how to make a change that will hold up.

What a revocable beneficiary is

A revocable beneficiary is a person you name to receive the insurance money but whose place you can change later. Under the Insurance Act, you may alter or revoke a beneficiary designation at any time by a declaration, subject to the rules on irrevocable designations.

You can name yourself, your estate or a beneficiary to receive the money. The designation can be in the contract itself or in a separate declaration.

While the designation is in effect, the money is not part of your estate and is not subject to your creditors' claims.

A beneficiary may enforce payment of the insurance money in their own name, although the insurer can raise any defence it could have raised against you.

What you can change

• Replace one beneficiary with another by a new declaration.
• Remove a beneficiary entirely.
• Name a trustee for a beneficiary, either in the contract or by a declaration.
• Provide the declaration electronically, if it meets the requirements in the Authority rules.

While a revocable designation is in place, you can generally also assign, surrender or otherwise deal with the policy, because the beneficiary is not named irrevocably.

If an irrevocable beneficiary has not consented, you may still exercise any rights under the contract that are prescribed by Authority rule. Anyone who acquires an interest in the policy takes it subject to that beneficiary's rights, unless a consent or court order provides otherwise. Where the irrevocable beneficiary is a minor or lacks capacity, you may apply to court for an order allowing you to deal with the policy without their consent.

The limits on changing a beneficiary

The main limit is an irrevocable designation. It can only be made in the contract, or in a declaration that is not part of a will, and the declaration must be filed with the insurer at its head or principal office in Canada while the life insured is alive. While that beneficiary is living, you cannot change or revoke it without their consent.

Another limit is the contract itself. An insurer may restrict or exclude in the contract your right to name beneficiaries, subject to the Authority rules.

Wills, timing and what happens if the beneficiary dies first

A beneficiary designation in a will has no effect against a designation made later than the will. If a will containing a designation is later revoked, the designation is also revoked.

If a named beneficiary dies before you and the contract or declaration does not say who takes their share, it goes to the surviving beneficiary. Several survivors share it equally. If none survive, it goes to you or your estate.

Naming your heirs, next of kin or estate counts as naming your personal representative, so the money is paid to the estate. Money paid to the estate loses the creditor shield, which applies only where a beneficiary is designated.

If a beneficiary is a minor and no one can give a valid discharge, the insurer must pay the money into court to the minor's credit within 30 days after it receives the required evidence. The insurer may instead pay the minor's guardian of property appointed under s. 47 of the Children's Law Reform Act. Naming a trustee for the child is another option. If the designation sets no trust terms, the trustee may only hold and invest the money until the child turns 18.

What to do next

Two other points are worth knowing. Life insurance on the deceased's life that the deceased owned is added back to the net estate when a court sets dependant support, so a designated beneficiary can be reached by a support order. The CRA also lists most life insurance payouts after someone's death among amounts you do not report as income. How these apply depends on your situation, so it is worth confirming with a lawyer or accountant.

• Get a copy of your policy and any existing declarations.
• Check whether any beneficiary was named irrevocably.
• Check whether the contract restricts your right to name beneficiaries.
• Use a written declaration, and keep a copy that the insurer has acknowledged.
• If a beneficiary is a minor, think about naming a trustee.
• Ask a lawyer if the family situation is complicated, such as a separation or a possible dispute.

Frequently asked questions