Why Hua Could Not Simply Name Her Son on Her Insurance

The situation

Hua worked as a personal support worker, spending her days helping elderly clients across Milton with daily care. She was raising her eight-year-old son on her own; his father, Feng, lived in another city and saw him only a few times a year. Hua had no will. What she did have was a modest life insurance policy through her employer's group benefits plan, worth about $150,000, and she had done the one thing that felt obvious: she named her son directly as the beneficiary.

A health scare that summer, nothing serious in the end, pushed her to think seriously about what would happen to her son if she died before he was grown. She assumed the insurance policy already had that covered. It was the first thing she mentioned when she called Treadstone Law to ask about writing a will.

The problem with naming a minor directly

Our team explained something that surprises a lot of parents: in Ontario, a child under 18 cannot legally give a valid receipt for money. That sounds like a technicality, but it has real consequences. An insurance company cannot simply hand a six-figure payout to an eight-year-old, and it will not hand it to a parent or relative either, no matter how well-intentioned, unless that person has legal authority to receive it on the child's behalf.

Without that authority in place, an insurer facing a claim for a minor beneficiary typically pays the money into court, where it is held by a public office until the child turns 18. At that point, the entire amount is released to the child as a lump sum, all at once, with no ability to stage it out, restrict how it is spent, or account for what the child actually needs at 18 versus 25. Along the way, the money earns whatever return the court-administered fund earns, not what a family might choose for a long-term investment. There is also a formal application process to get funds released even for approved expenses like tuition or medical costs while the child is still a minor, and it takes time.

For Hua, this meant that if something happened to her, her son's inheritance would not go to a guardian who could spend it on his daily needs, his education, or a home down payment when he was ready. It would sit with the court, unmanaged for his specific situation, until his eighteenth birthday, then land in his hands all at once at an age when few people are ready to manage that kind of money well.

There was a second layer to the problem. Feng, the boy's father, was still legally entitled to seek guardianship of his son's property if Hua died without other arrangements in place, even though he was not involved in day-to-day parenting. Hua did not want to shut Feng out of her son's life, but she also did not want him controlling the insurance money without any structure or oversight.

What we did

1. Mapped the full picture before drafting anything. We asked about every asset Hua held, not just the insurance. Beyond the policy, she had modest savings, a car, and a small share in a family property, bringing her total estate to somewhere between $150,000 and $180,000 including the insurance proceeds. Understanding the whole picture mattered because a trust structure needed to work for all of it, not just the largest piece.
2. Built a testamentary trust into the will. A testamentary trust is a trust created by a will that only comes into effect on death. Rather than leaving assets to her son outright, Hua's will directed that everything, including any insurance proceeds payable to her estate, be held in trust for him until a set age, with the trustee given discretion to spend on his care, education, and general wellbeing before then.
3. Named a trustee outside the child's other parent. Hua's brother Biniam, a bookkeeper with steady financial habits, agreed to act as trustee. This kept day-to-day financial management with someone Hua trusted, while leaving Feng's role as a parent and potential guardian of the person (meaning day-to-day custody and care, a separate question from control of money) untouched. Naming a trustee for the property did not affect who would raise her son if she died; it only controlled who managed his inheritance.
4. Updated the insurance beneficiary designation to route through the trust. This was the step that actually solved the original problem. Rather than leaving her son named directly on the policy, Hua changed the designation so the proceeds would be payable to her estate, to be held under the trust terms in her will. This meant the insurance company would pay according to the will's instructions instead of triggering the default rules for payments to a minor.
5. Staggered the distribution instead of an all-at-once release. The will set the trust to release portions of the inheritance at ages 21, 25, and 30, rather than turning over the full amount the moment her son turned 18. This gave him support at meaningful milestones, like finishing school or buying a first home, without handing an inexperienced young adult a lump sum all at once.
6. Named an alternate trustee and a backup guardian. If Biniam were unable or unwilling to serve as trustee, a second family member was named to step in, so the trust would never be left without someone accountable. We also confirmed guardianship wishes for her son's day-to-day care separately, so that question would not default to a court application either.

The outcome

Once the will was signed and the insurance beneficiary designation updated to name Hua's estate, the structural gap closed. If Hua died while her son was still a minor, the insurance proceeds would flow into the trust her will created, managed by Biniam, rather than being paid into court and locked away from anyone until her son turned 18. The staggered ages meant her son would receive support in stages as a young adult, not a single lump sum handed to a twenty-five-year-old on his birthday with no history managing that kind of money.

Hua also came away with clarity she had not had before: naming a child directly as a beneficiary on an insurance policy or an RRSP is one of the most common estate planning mistakes parents make, precisely because it feels like the safest, simplest choice. It is only once someone explains what actually happens next, the court, the public administration, the all-at-once release at 18, that the gap becomes visible.

The whole process, from the first call to a signed will and an updated beneficiary form with her insurer, took about six weeks, most of it waiting on Hua's schedule around shift work rather than any legal delay. The plan cost her nothing close to the peace of mind it bought her about what would actually happen to her son if the worst happened while he was still growing up.

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