Beneficiaries and What Passes Outside Your Will

Under Ontario law, you may designate beneficiaries to receive certain financial assets such as life insurance proceeds, RRSPs, or pension plan benefits. These assets are paid directly to the named beneficiary upon death and are not administered by the estate trustee — they pass completely outside the estate, unaffected by the directions in your will. 
 

Products That Allow Designations

Not all investment accounts permit beneficiary designations, but all registered plans do. In Ontario, individuals can name a beneficiary directly on plans such as RRSPs, RRIFs, and Locked-In Retirement Accounts (LIRAs). Designations can typically be made on the applicable plan administrator’s or financial institution’s form, or through a written designation that meets certain legal requirements. 
 

The Probate Advantage — and Its Tax Trap

For probate purposes, funds in a plan that pass by beneficiary designation are not part of the estate — no probate tax is payable on them, and they are not governed by the will. However, RRSPs and RRIFs create taxable income for the estate (not the beneficiary) unless the plan is rolled over to a surviving spouse. If the funds pass to a named beneficiary who was not the spouse of the plan holder, the estate trustee must include the full value of the plan on death as income in the deceased’s last tax return. This is a common and costly surprise for families. 
 

RRSP Converted to a RRIF? You Need a New Designation

Make sure to update the beneficiary designation for an RRSP that has been converted to a RRIF, and ensure the bank has a copy of the beneficiary designation. Courts have reached different conclusions on whether an RRSP designation follows the funds when converted to a RRIF — don’t leave it to the courts to determine your intentions. 
 

Your Will Doesn’t Always Win

Conflicts between a will and a beneficiary designation can create legal uncertainty. In Ontario, if a designation is made in both the will and the plan documentation, the most recent valid designation will generally prevail. Coordinating your designations and your will ensures they are aligned and reflect your intentions. 
 

Naming Minors as Beneficiaries

Designations to beneficiaries who are children under 18 create significant potential issues. The Office of the Children’s Lawyer must be notified of the potential gift, and if the amount exceeds $10,000, proper guardianship must be established to manage the funds until the child turns 18. A parent is NOT automatically the guardian of the property of their own minor child — a court order of guardianship will be required. 
 

Always Name a Backup

Without a named contingent (backup) beneficiary, if a primary beneficiary predeceases you, those assets could be forced into your estate — subjecting them to the probate process, which can add months of delay and thousands of dollars in avoidable fees. 
 

The Power of Attorney Gap

Ontario has not enacted legislation enabling attorneys for property to carry over beneficiary designations across plans (for example, when an RRSP is converted to a RRIF). Only Alberta, British Columbia, Manitoba, and New Brunswick currently allow this. The Ontario Bar Association has called for legislative reform on this issue.
 

Gift Tax in Ontario: What You Need to Know Before Giving

Whether you’re helping a child with a home down payment, transferring investments to a spouse, or leaving assets to grandchildren, gifting is one of the most generous things you can do with your wealth. But many Ontarians hesitate — worried that a large gift will trigger a surprise tax bill.
 
The good news? Contrary to popular belief, you don’t pay tax on a personal cash gift in Canada, neither as the giver nor the receiver. Many Canadians pick up this misconception from the U.S., where gift tax rules are very different. 
 
But — and this is important — while there’s no gift tax per se, certain types of gifts can still have real tax consequences. Here’s what every Ontario resident should understand before being generous.

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