Designating Direct Beneficiaries

When you want to maximize your estate for your spouse or children, designate direct beneficiaries for your assets. It reduces the probate tax your estate pays, leaving more behind for the ones you love.

Life insurance, RRSPs and RRIFS or investments and more can all be left to designated beneficiaries, without estate administration tax being required. 

Ask Axess Law how to arrange your estate to make the most of direct beneficiary designations. 

Who Can Inherit Ontario Wills

Ontario inheritance rules are simple. 

  1. Anyone 18 or over can be named a direct beneficiary or included in your Will — it doesn’t have to be next-of-kin. 
  2. Assets are used first to pay funeral and related costs, estate administration taxes (sometimes called probate fees), creditors and your estate trustee. The residue (what’s left over) is distributed to beneficiaries according to your final wishes.
  3. A surviving spouse and minor or adult dependents you supported financially receive assets ahead of others. 
  4. Jointly owned assets and those with designated beneficiaries pass directly outside of probate court. But a dependent can place a claim on money or property they need for financial support.
  5. Divorced or separated spouses are treated the same under new Ontario Wills laws. Starting Jan. 1, 2022, if you want your assets to go to a new spouse or others, you must make new Wills when you separate or divorce. 
  6. Minor children have assets placed in a trust administered by your estate executor, a parent or legal guardian of their property. Small amounts may be given directly to a parent or legal guardian who cares for a child. 

Why Name Family Beneficiaries

Anyone can make the mistake of putting off their Will until it’s too late. The Artist Formerly Known as Prince did. His business empire was still in tax court five years later. 

Yours doesn’t have to be. Besides ensuring your family is cared for after you die, naming spouses and children direct beneficiaries has tax advantages. 

RRSPs and RRIFs, for example, are taxed as income on your final income tax return. The estate trustee files the return with the Canada Revenue Agency (CRA) and the CRA deducts tax on the day you die from the total value of RRSPs or RRIFs.

That means your estate could be losing cash your family needs after you pass on. Naming certain next-of-kin can save estate assets for those you leave behind. Canadian tax law allows your Wills and estate trustee to defer income taxes if your beneficiary is:

  • your legally married spouse
  • common law partner
  • financially dependent child or grandchild under 18
  • or adult child or grandchild with mental or physical disabilities, who relies on you for financial support.

What Happens to Outdated Wills

When your Will is out of date, beneficiaries you designated years earlier inherit, even if that’s not what you planned. You may have separated, divorced, remarried or had a falling out. But if you’ve forgotten to change your Will, your assets will go to family or associates you originally named. Stepchildren you legally adopted, a new spouse or valued business partner could be left out altogether.

Who Gets Your Estate

Halifax mother Diane Taylor was devastated when her husband Tim died three weeks after being diagnosed with cancer. The fast spreading disease left the family reeling. The biggest shocks were yet to come. 

Tim had left the family’s RRSP to his mother. Yet his estate owed taxes on it: 54% of the RRSP’s value. Because the RRSP passed outside his estate assets, the trustee couldn’t use it to pay the taxes.

Although his spouse and 13-year-old daughter were in his Will — and automatically received his pension plan benefits — Tim had made a direct beneficiary designation for his RRSP.

The couple’s Wills included a clause revoking beneficiaries and naming each other as recipients of their estates’ assets. The RRSP, made while Tim was young, was listed in the Will. But the revoking clauses didn’t apply, lawyers told her.

Fortunately, the family was able to use its life insurance policy to pay Tim’s mother the after-tax value of his RRSP. Diane is now advocating for protections that would protect other Canadians from similar surprises.

How to Designate Beneficiaries 

Directly designated assets can go to anyone you desire. Probate isn’t necessary to claim life insurance proceeds, investments, RRSPs, RRIFs, pension plan benefits and more. Your estate trustee has no say in who gets designated assets, although probate  law on waiver of probate in Ontario limits what you can include.

If you’ve ever bought investments through a bank or signed up for pension benefits, you’ve been offered the option to name a beneficiary when you die. The beneficiary designation form is filled in and given to your bank, investment or insurance broker for safekeeping.

Or you can specify designated beneficiaries in your Wills in Ontario, as long as the policy or investment exists when you sign. Any new assets you collect after you write a  Will requires a codicil (or amendment) — Axess Law writes new Wills instead, because it’s quicker, cleaner and costs no more than making a codicil. When you die, those assets go directly to beneficiaries, without paying probate fees. 

Can You Disinherit Family?

Courts rarely overturn Wills, but if you have disinherited minor children, legally married spouses or dependents who relied on you financially, yours could be challenged. Your estate trustee cannot change your Will, which is why Ontario Wills laws protect family dependents from unfair Wills or if you forgot to make a Will altogether. 

What Happens When You Have No Will

Probate court administers your estate if you died without a Will, distributing your assets according to a preset formula (Succession Law Reform Act). While your assets may not be gifted the way you intended, rest assured your family comes first.

Why You Need a Lawyer

Primary and secondary Wills, forgotten Wills, designated beneficiaries for life insurance or investments — when you’re wondering what is probate anyway, Axess Law has answers

Legal Wills in Ontario must satisfy certain rules to be accepted by the court. Whether your Will is handwritten or prepared by a licensed lawyer, it can fail to meet evolving probate court standards.

Why worry about the finer points when our quick, easy to follow Wills services cost only $199.99 per Will ($600 and up for multiple Wills). For $249.99, you can have basic Wills and power of attorney for personal care or property at the same time. 

Documents We Need

Bring valid Ontario photo ID to meet with your Axess Law lawyer. We have Wills lawyers near you in Greater Toronto Area or Ottawa and can go online for remote video calls anywhere in Ontario.

Plan ahead for estate trustees (one or more) and what gifts you want to give beneficiaries. Your separation agreement or divorce decree and information on minor or dependent children are important information for Wills and estates planning. Email or bring them with you.  

Tell us if you are interested in including bequests for pets or special causes or have other requests you want included in your final wishes.

Easy Online Bookings or Call Toll Free

Book day or evening Wills appointments, 7 days a week, at any of our law offices nearby you. Parking is available onsite, with easy transit access. Use our easy online booking form to find probate lawyers near you at dates and times that suit your schedule. Or call our 1-647-479-0118 lawyer line for your preferred time and location. Toll free calls accepted at 1-877-402-4277.