Naming a Beneficiary on your Insurance & Investment Policies

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.

Your Legacy

Your legacy is more than a bank balance. It's the impact you make on your community and your family. Here are six tips for turning a nice thought into a powerful reality:

1) Get Organized - Ensure your personal information - bank account and investment contract numbers, insurance policies, tax information, etc. - are up to date and stored somewhere safe and accessible by your advisor, attorney, beneficiaries or family members.

2) Check your Will - Make sure you have a will and it reflects your current intentions. Do the same with any power of attorney or other legal documents. If you don't have a will, or need to change it, contact me or someone you trust to obtain the name of an estate lawyer ho can help draft yours.

3)  Name Names - Select an executor for your estate and ensure that all beneficiary designations complement those outlined within your will.   

4) Consolidate your Finances - Streamline your investments and bank accounts to simplify administration. Having joint accounts makes it easier to ensure resources are readily available.

5)  Minimize Taxes - Consider investments and strategies that allow your estate to bypass probate and minimize the tax bill for the next generation.

6) Discuss your Plans with your Family - Keeping them informed can help them understand your decisions.    

Over time, situations change.  Your children become adults, tax laws change, your executor ages.  It is important to review your plans every few years to ensure that they are still appropriate.