Will vs Beneficiary Designation in Ontario: Which One Wins?

You are going through a loved one's papers and find a problem. The will leaves everything to one person, but the life insurance, RRSP, RRIF or pension form names someone else. It is natural to ask which document the insurer or plan administrator will follow.

In Ontario the answer depends on the type of asset, because insurance, registered plans and pensions each follow slightly different rules, and some have exceptions for spouses. This article explains the general picture so you know what questions to ask.

Life insurance: the later designation wins

A person insured under a life insurance contract may name a beneficiary in the contract itself or by a declaration. A declaration is an instrument signed by the insured and endorsed on the policy; it identifies the contract or describes the insurance, and it designates or changes a beneficiary. Unless the designation is irrevocable, the insured may change or revoke it at any time by a declaration.

A beneficiary can also be named in a will. However, a designation in a will has no effect against a designation made later than the will. So if the will names a child but a form signed after the will names a spouse, the later form controls. If a will containing an insurance designation is revoked, by operation of law or otherwise, the designation in it is revoked too.

An insurer may also, subject to the Authority rules, restrict or exclude the insured's right to designate beneficiaries in the contract, so the policy wording matters.

When "irrevocable" really is irrevocable

An insured may name a beneficiary irrevocably in the contract or in a declaration, but not in a will, that is filed with the insurer during the insured's lifetime. While that beneficiary is living, the insured cannot change or revoke the designation without the beneficiary's consent.

If an "irrevocable" designation is made in a will, or in a declaration that is not filed with the insurer, it has the same effect as an ordinary revocable designation.

RRSPs, RRIFs and other plans

For plans other than insurance, such as RRSPs, RRIFs and pensions, a participant may designate a person to receive the benefit payable on death. A designation in a will is effective only if it relates expressly to a plan, either generally or specifically. Between designations, a later one revokes an earlier one to the extent they are inconsistent, so whichever valid designation, in the will or on the plan form, is made last controls. Ontario pensions are different: when a member dies before the pension starts, the spouse is entitled to the pre-retirement death benefit ahead of any designated beneficiary, unless the spouse has waived it, as explained below.

The plan administrator is discharged on paying the benefit to the person designated, and that person may enforce payment. This is why administrators usually follow the paperwork on file.

There is an exception. These plan-designation rules do not apply to a designation to which the Insurance Act applies, such as an insurance-company RRSP or annuity. Those follow the insurance rules above.

Pensions, "estate" designations and other special cases

• Naming the insured's "heirs, next of kin or estate" is treated as a designation of the personal representative, so the money goes through the estate rather than bypassing it.
• For an Ontario-registered pension, when a member dies before the pension starts, the spouse is entitled to the pre-retirement death benefit ahead of any designated beneficiary.
• A designated beneficiary, and then the estate, takes the commuted value only if no spouse is entitled.
• A spouse who was living separate and apart from the member on the date of death has no entitlement to that benefit.
• A spouse may waive the benefit by delivering a written waiver to the plan administrator in the approved form, and may cancel it by signed notice before the member dies.
• For pensions, a spouse includes an unmarried partner who has lived with the member continuously for at least three years, or who is in a relationship of some permanence and is the parent of a child with the member.

The pension rules cover Ontario-registered plans only. Federally regulated plans and plans in other provinces can follow different rules, so confirm which law governs the plan.

Outside the estate, but not always out of reach

When a beneficiary is designated, life insurance money does not form part of the insured's estate and is not subject to the claims of the insured's creditors. Designated assets also generally skip probate for Estate Administration Tax purposes, including registered plans with a beneficiary designation.

A dependant's support claim is different. For that claim, life insurance owned by the deceased and amounts payable under a plan designation are deemed part of the net estate, so a dependant can reach designated assets. Such an application generally cannot be made more than six months after the grant of letters probate or administration, although the court may allow a later application against any part of the estate still undistributed.

What to do next

• Collect the current will and every beneficiary form, noting the date each was signed.
• Ask the insurer or plan administrator, in writing, who is on file and whether a declaration or form has been filed.
• Check whether the plan is an insurance product, a non-insurance registered plan or an Ontario pension.
• Find out whether a spouse, common-law partner or other dependant may have a claim.
• Before acting on either document, confirm with a lawyer how the rules apply to your situation.

Conflicting documents can lead to disputes, and the dates and wording matter. A lawyer can review the documents and explain who is likely to be entitled.

Frequently asked questions