In Ontario, the value
of naming a beneficiary versus leaving money to your estate is significant.
If you name a
beneficiary, an insurance company is obligated, under the Insurance Act, to pay
any death benefit proceeds to the named beneficiary on record. Because the
death benefit proceeds do not pass through the estate, they not only avoid the
delays of settling the estate but also bypass probate and other estate
administration fees. In Ontario, probate fees on assets over $50,000 are 1.5%.
Other estate administration, accounting and legal fees could be another 5% or
more depending on the complexity of the estate.
The other reason to
name a beneficiary is it makes the transaction private. Unlike a will - which
becomes a public document, available for anyone to see when it goes to probate
- naming a beneficiary means that only the person named needs to know the
specifics. The extra privacy can prevent jealousy and tension among those named
(or not named) in a will and reduce bad feelings over "getting my fair
share".
Do you have a Life
Insurance Policy, a Registered Investment Policy (e.g. a RRSP) or a Segregated
Fund Investment Policy? All of these should have both a primary and a contingent
beneficiary named on the policy (not in your will).
If you're not sure
whether you have named a beneficiary, get in touch with me and I'll be pleased
to help you out.
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