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Life Insurance and Estates: FAQs

life insurance estate planningLife insurance can sometimes be a large part of an estate. Quite understandably, the estate planning clients that I meet with at my law office in the Kanata-Stittsville area of Ottawa as well as the executors (also called estate trustees) have a lot of questions about life insurance. Here are a few of those questions:

I am the executor of my father’s estate. He owned a large insurance policy on his life. In his will, he named me and my brother as beneficiaries of that policy. However, the insurance company reports that their records list dad’s second wife as the beneficiary.  Who gets the insurance money?

For privately-owned life insurance policies (not part of group plan coverage), the most recent (latest dated) beneficiary designation is generally valid, whether the designation is in the person’s will or filed with the insurance company.  For this reason, it is important that the insurance company be notified if a will is signed which includes a beneficiary designation, especially if the designation differs from an earlier designation on file with the insurance company.

We recommend that clients fill out, sign and submit the beneficiary change forms provided by the insurance company or send a copy of the signed will to the insurance company so that its records can be updated.   Note that beneficiary designations for group insurance cannot be changed in a person’s will.  To change the beneficiary of insurance through a group plan, complete and file the necessary paperwork with the group plan administrator (usually the HR department where a person works).

My life insurance policy has lapsed because the premiums weren’t paid. My will names a beneficiary of the now non-existent policy. Can that beneficiary make a claim against my estate?

Generally, the answer is no.  If a person is named as a beneficiary of an insurance policy but the policy no longer exists at the date of death, no gift is substituted from other estate assets unless the will specifically allows for this.  It is rare that a will would include such a condition.   Without mention in the will and no insurance policy, the potential beneficiary has no basis for a claim unless there are other grounds such as a claim for support.

I have just reviewed my estate planning and have named a different beneficiary on each of my life insurance policies.  I have very specific reasons for doing this.   Although I completely trust the person I have named as my attorney for property, I am wondering if she could use the power of attorney to make  changes to my beneficiaries and upset my estate planning goals.

An attorney for property cannot do anything that is of a ‘testamentary nature’, that is, take steps to change how a person’s estate is distributed on death.   Therefore, an attorney for property is unable to change a beneficiary designation for a life insurance policy. The same holds true for RRSPs, TFSAs, etc.

Do you have life insurance but aren’t sure how to address it in your estate planning? Are you an executor of an estate where there are insurance policies that you aren’t sure how to deal with? Call 613.836.9915 or email info@nlestatelaw.com to make an appointment to meet with me. We will review the specific details of your unique situation and ensure you have all the information you need to make an informed decision.

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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