Naming a Beneficiary

A beneficiary is the person you name to receive payment from your insurance policy when you die. You can name your spouse, another family member, friend or charitable organization as beneficiary.

You can name more than one beneficiary for your life insurance policy. If you do this, your insurance company will divide the death benefit among them. You may assign different proportions of your life insurance benefits to each beneficiary.

If the beneficiary is revocable, you can change the beneficiary at any time without telling them.

If the beneficiary is irrevocable, you must have the irrevocable beneficiary's written permission before making beneficiary changes.

If you live in Quebec and name your spouse as your beneficiary, the designation is automatically irrevocable. You must specifically make it revocable when you first designate your spouse in Quebec.

Naming a beneficiary who is under legal age

If the beneficiary you name is under the legal age when you die, you may want to set up a trust and designate a trustee or administrator. This person can hold the proceeds of the death benefit in trust on behalf of the minor.

If you don't name a trustee or administrator, the death benefit, plus any interest it earns, will be held in trust by the province or territory. It will be paid out when your beneficiary reaches legal age. Consult with a lawyer or financial advisor for more details.

Naming your estate as the beneficiary

If you name your estate as the beneficiary. The estate will distribute the death benefits according to the terms of your will. The proceeds of the death benefit will become part of your estate and will be subject to estate taxes. If the death benefit is part of your estate, creditors may claim the death benefit to pay for your outstanding debts.

If you name your estate as your beneficiary:

• the death benefit will become part of your estate

• the death benefit will be distributed according to the terms of your will

• the money will be subject to taxes when your estate is settled

How to name a beneficiary

It's important to name a beneficiary for each policy form when you purchase life insurance. If you don’t, your insurer will assume by default the beneficiary is your estate.

You may want to consider naming an alternate or contingent beneficiary. This is the person or persons who will receive the proceeds of the death benefit if your named beneficiary dies either before you or at the same time as you.

It's a good idea to review your beneficiary designations from time to time and update them if necessary.