- A specific beneficiary receives a named item or sum, while a residuary beneficiary receives what is left after the estate trustee pays taxes and debts.
- Some assets, such as insurance with a named beneficiary, do not form part of the estate at all.
- If an estate may not cover all its gifts, the answer depends on the will's wording and the law, so get advice before distributing.
If you are named in a will, the first thing to find out is what kind of gift you have. Some people are left a particular item or sum of money. Others are left whatever remains. The difference matters most when the estate has debts or is smaller than expected.
This article explains the two types of beneficiary, where debts and taxes fit in, and which assets never reach the will. It does not replace advice on a particular estate.
The plain difference
A specific beneficiary is left something identifiable, such as a named piece of jewellery, a particular property or a stated sum of money. A residuary beneficiary is left the residue, which is what remains of the estate after the specific gifts, debts and taxes have been dealt with.
Wills often leave the residue to one person or to several people in shares. The wording of the will decides who is in which group, so read the actual clauses rather than relying on how someone described them.
Where debts and taxes fit
An estate trustee collects the estate's assets, pays taxes and debts, and distributes the residue to those entitled. Debts and taxes are therefore dealt with before the residue is final.
Because the residue is what is left over, its size moves with the size of the debts and taxes. A specific gift is defined by the item or amount, not by what is left. If the estate cannot cover everything, how the gifts are reduced depends on the will's wording and the law, and it is worth getting legal advice before anything is paid out.
Assets that never reach the will
Many people are surprised that some of the largest assets do not pass under the will at all. The table shows how a few common ones work.
| Asset | How it passes |
|---|---|
| Life insurance with a named beneficiary | The money does not form part of the insured's estate and is not subject to the claims of the insured's creditors. |
| Insurance naming the heirs, next of kin or estate | It is treated as a designation of the personal representative, so the money goes through the estate. |
| Registered plans with a beneficiary designation, and jointly owned assets that pass automatically | They are excluded from the estate value used for Estate Administration Tax. |
A dependant's support claim is an exception. For that claim, life insurance owned by the deceased and amounts payable under a plan designation are deemed part of the net estate, so designated assets can still be reached by a dependant.
Protecting the trustee and the beneficiaries
- A legal representative should get a CRA clearance certificate before distributing estate property, because anyone who distributes without one is personally liable for unpaid amounts, up to the value of the assets distributed.
- A dependant's support application generally cannot be made more than six months after the grant of probate or administration, though the court may allow a later application against any part of the estate still undistributed.
- A court may relieve a trustee from personal liability for a breach of trust if the trustee acted honestly and reasonably and ought fairly to be excused.
- Where a beneficiary cannot be found, trust money may be paid into court by court order, after which it is subject to the court's order.
What to do next
- Read the will and note which gifts are specific and which are residuary.
- List which assets pass by beneficiary designation or joint ownership, since they sit outside the will.
- Ask the estate trustee for an account of debts, taxes and expected costs.
- Ask a lawyer what happens to each gift if the estate looks too small.
- Do not accept or demand a distribution until taxes and debts are dealt with.
Frequently asked questions
What is a residuary beneficiary?
It is a person who receives the residue, meaning what is left after the estate trustee collects assets, pays taxes and debts, and distributes the rest. The will sets out who that is and in what shares.
Do debts come out of a specific gift or the residue?
The estate trustee pays taxes and debts as part of administering the estate before distributing the residue. If the estate is too small to cover all gifts, the result depends on the will's wording and the law, so ask a lawyer.
Is life insurance part of the residue?
Not if a beneficiary is designated, because the money does not form part of the insured's estate. If the policy names the estate or the heirs, the money goes through the estate.
Can the trustee be personally responsible for a mistake?
A legal representative who distributes without a CRA clearance certificate is personally liable for unpaid amounts, up to the value of the assets distributed. A court may relieve a trustee who acted honestly and reasonably in a breach of trust.
Sources
- Insurance Act, R.S.O. 1990, c. I.8, s. 196(1) — Ontario e-Laws
- Succession Law Reform Act, s. 72(1)(f),(g) — Ontario e-Laws
- Ontario.ca – Estate Administration Tax — ontario.ca
- Ontario.ca – Administering estates — ontario.ca
- Trustee Act, R.S.O. 1990, c. T.23, s. 36 — Ontario e-Laws
- CRA – The purpose of a clearance certificate — canada.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
This is a wills & estates question
Start a file online — flat, published fees, reviewed by a licensed lawyer before a dollar is owed.