The Ontario Wills and Estates Law Blog

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How Not To Leave Insurance Proceeds To Minor Children

I recently met with Shawn and Andrea at my law office in Stittsville near Ottawa. They had recently moved some assets around and had changed some beneficiary designations. With two young children, they wanted to make sure that what they had done made sense.

One question that Shawn and Andrea had in particular – and it is one that many parents have – is  whether it is O.K. to name a trustee as a beneficiary of life insurance, RRSPs, RRIFs, TFSAs, to hold the proceeds ‘in trust for’ someone who is under the age of 18? They had been told by their advisor to name a sibling to hold the proceeds in trust for their children.

What is the best way to leave insurance proceeds to your minor children?

What is the best way to leave insurance proceeds to your minor children?

I explained to Shawn and Andrea that unless there are specific terms and conditions set out in the beneficiary designation or in another document such as a trust declaration, naming a beneficiary as a trustee for children under the age of 18 results in a bare trust.  The trustee if a bare trust can’t do much more than invest the funds until the child turns 18.  At that time, the trustee must turn over all the money to the child and the child can demand a full accounting of what has been done with the trust funds while the trustee was looking after it.  While the child is under 18, a trustee of a bare trust must have court approval to pay trust funds to or for the child or to pay funds to the child’s parents.

Shawn and Andrea were shocked to learn this. This is not what they wanted. Together we explored various options for leaving an inheritance to a minor beneficiary. They were able to make choices that reflected their estate planning goals.

If you have young children, don’t delay in making an appointment to meet with one of our lawyers. We will review your unique situation and advise you of the options that are available to meet your needs and make sure your family is well-protected.

Reproduction of this blog is permitted if the author is credited.  If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information.  Please consult a lawyer or other professional to determine how the information in this blog might apply to you.

Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.


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