Types of Beneficiaries in an Estate: Residuary, Specific and More

Wills use terms such as specific, general, residuary and contingent, and they can sound intimidating when you are reading one for the first time. Each term simply describes what a person receives and under what conditions.

This article explains the main types in plain language, how they relate to each other, and why the type of beneficiary matters in an Ontario estate. How your own will should be read depends on its exact wording, so a lawyer can confirm.

The main types at a glance

One person can fit several categories. A child may receive a specific item, a sum of money and a share of the residue.

Specific and general gifts

A specific gift is a particular, identifiable item. What happens if that item was sold or given away before the person died depends on the will's wording and the facts, so it is worth confirming with a lawyer.

A general gift is a described benefit that is not tied to one particular item, most commonly a sum of money. It is paid from the estate's assets, but only after the estate trustee has collected assets and dealt with debts, which is part of the trustee's role. An Ontario estate trustee is responsible for winding up the deceased's affairs, paying taxes, bills and debts, collecting assets, and carrying out the will's wishes in line with the law.

The residuary beneficiary

The residue is what remains once the estate has been collected and the funeral costs, debts and other gifts have been dealt with. With a will, the estate is normally distributed as the will directs after assets are liquidated and funeral costs and debts are paid.

Residuary beneficiaries often feel the effect of every cost. Funeral costs and debts are paid before the estate is distributed, so the final amount may be smaller than expected. A trustee is entitled to a fair and reasonable allowance for care, pains, trouble and time spent on the estate, as a judge allows, except where the instrument fixes the allowance. Because this reduces what remains for the residuary, residuary beneficiaries are often the people most interested in how the estate is run.

An estate trustee generally should not pay themselves ahead of time. Pre-taking compensation is permitted only on the agreement of all persons with a vested or contingent interest (if sui juris), where approved by the court, or where the will so provides. Otherwise there is a risk of liability for breach of trust, a reduced allowance and repayment on a passing of accounts.

Contingent and life-interest beneficiaries

A contingent beneficiary receives only if something happens or does not happen. The most common condition is that the first named person must survive the will-maker. A contingent gift can also depend on reaching a certain age or on another event.

A life-interest beneficiary has the right to use or receive income from property for their lifetime. Someone else, often called the remainder beneficiary, receives the property afterward. These arrangements involve a trust, so a trustee manages the property and decisions about sale, upkeep and income can become contentious.

Life insurance and registered plans follow a different set of rules from a will. If a life insurance beneficiary dies before the insured and the contract makes no disposition of the deceased beneficiary's share, the share is payable to the surviving beneficiary, or to the surviving beneficiaries in equal shares if there is more than one. Always read the insurance or plan form alongside the will.

Special situations that affect beneficiaries

• Minors: if any beneficiary is under 18, the Office of the Children's Lawyer must be served when applying for a certificate of appointment of estate trustee, and may act for that child.
• Surviving spouses: a surviving spouse can choose an equalization payment under the Family Law Act instead of what the will or intestacy gives, and the Election of Surviving Spouse form must be filed no later than six months from the date of the spouse's death.
• No will: without a will, the Succession Law Reform Act sets who inherits, generally the spouse and closest next-of-kin, and a common-law spouse does not inherit under that Act.
• Beneficiaries on ODSP: inheritances or life insurance proceeds placed in trust for an ODSP member are exempt as an asset up to $100,000 combined with life insurance cash surrender value. Gifts and voluntary payments above $10,000 in a 12-month period can count, and payments from trusts, life insurance and windfalls count toward the same $10,000.
• Notice: when applying for probate, the applicant must send or give the application to the estate beneficiaries before filing with the court. A person with a financial interest can use Form 74P to ask to be notified of estate proceedings.

What to do next

• Read the will line by line and mark each gift as specific, general, residuary, contingent or life interest
• Ask the estate trustee for a copy of the will and for updates on progress
• Keep in mind that the residue is paid last, after debts and costs
• If you are unsure whether you have an interest, remember that a person who appears to have a financial interest may apply for directions on the procedure for bringing a matter before the court
• If you receive disability benefits, speak with a lawyer before accepting money so benefits are not put at risk
• Speak with an Ontario estates lawyer if the wording is unclear or you believe a gift is wrong

Frequently asked questions