Beneficiaries 101
What is a beneficiary?
A beneficiary is a person or charity named in a Will that receives some (or all) of someone's assets upon their death. As the Will maker, you can leave all assets to one beneficiary, or you can have multiple beneficiaries who will inherit various assets from your estate.
You may have also heard the term “designated beneficiary” in connection with a life insurance policy or a registered investment account. In the case of an insurance policy, the designated beneficiary named on the policy receives the insurance proceeds; in the case of a registered account, the designated beneficiary becomes entitled to the value of the account when the owner dies.
The same is true with beneficiaries named in a Will, who become entitled to receive the assets in the person's estate in the manner prescribed in the Will.
What do beneficiaries receive?
A beneficiary named in your Will receives … whatever you want them to, as set out in your Will.
You can decide whether your beneficiaries receive specific assets (like personal property, real estate, or cash). As long as you’re clear in your Will, your executor will be responsible for distributing the items or assets to the individuals or charities.
Before we describe the assets most commonly left to a beneficiary in a Will, let’s take a look at some assets that are not usually dealt with under a Will:
Jointly owned property (like joint real estate or joint accounts)
Trust interests
Insurance policies or registered accounts that name a designated beneficiary
These categories of assets generally do not make up part of a person's estate, so they are not dealt with in a person's Will.
Here are some common items beneficiaries may receive under a Will:
Personal Property
If you want, your Will can specify who should receive your personal property upon your death. A Will should not list everything you own—just the specific items you want to leave to particular individuals and charities.
Some common gifts of personal property include:
Jewelry
Art
Cars
Family heirlooms
Family albums and photographs
Books
Real estate
You may want to leave your house to one beneficiary, but a cottage or summer home to another beneficiary. Real estate also includes any land or rental buildings you own.
If someone owns a property (like their family home) jointly with someone else (such as their spouse), then that property may not form part of their estate when they die, depending on how ownership is structured. In these cases, the property may simply become the property of the surviving owner and not be affected by the deceased's Will.
Charitable donations
Charities can be beneficiaries of your Will.
Charitable donations contained in a Will, also known as planned gifts or legacy gifts, can be almost anything, including personal property, cash, investments, or a percentage of the estate. When someone leaves a percentage of your estate to charity, the organization may receive a share of the estate's investments or the cash value equivalent based on the total value of the estate.
Cash
You can leave cash to beneficiaries in your Will in two ways.
Option one is to specify a dollar amount. For example, “I leave $5,000 to my cousin, Christopher.”
Option two is to have someone receive money as part of the “residue” of your estate. The residue of an estate is the part of the estate that is left over after all gifts that have been specifically identified in the Will (e.g. gifts of personal property and dollar-value cash gifts) have been accounted for. A beneficiary of the residue of an estate (which usually represents the bulk of the estate) is generally assigned a "share" or "portion" of the residue to which they are entitled.
An example: After your debts and taxes have been paid, and all gifts of specific property (including specific dollar-value cash gifts) have been satisfied, there is $100,000 of value left in your estate (cash and investments). You’ve specified in your Will that you want to split the “residue” of your estate into two equal shares: one for your sister Fatima and one for your brother Rahid. If Fatima and Rahid are both alive at the time of your death, each of them would be entitled to $50,000 of value from your estate.
Who qualifies as a beneficiary?
A beneficiary can be any of your loved ones or any charitable organizations that you specify in your Will. The person you choose to be your executor may also be a beneficiary.
Common beneficiaries are:
Spouse
Common-law partner
Children and/or stepchildren
Parents
Friends and acquaintances
Other family members
Charitable organizations
Heads up #1: You can name minors as beneficiaries, but they won’t receive their full share of assets until they reach the age of majority in your province (or a later age as specified in your Will). Until that age, their inheritance must be held in trust. As long as the Will allows for it, part of a minor's inheritance can be paid to them before they become entitled to receive the full inheritance.
Heads up #2: If you have a common-law partner, it’s important to have a Will if you want your partner to be a beneficiary. In many provinces common-law partners don’t have the same property rights as married couples upon death, so dying without a Will can lead to some disastrous results.
And just in case it’s not obvious: you can't name your pet as a beneficiary. We know it’s sad … but it’s the unfortunate truth.
Primary and contingent beneficiaries
A “primary beneficiary” is someone who is first in line to receive the assets of an estate.
A “contingent beneficiary” will only receive an inheritance if a certain condition (or contingency) is met. A typical example of a contingent beneficiary is someone who will inherit a portion of the estate only if another person (e.g. their parent) is a primary beneficiary who dies prior to the Will-maker's death.
For example, in a simple Will, Kara might name her wife Jane to be a primary beneficiary to receive all of her assets. Kara could also specify that if Jane is not alive on the date of her death, her daughter Susan should receive all of her assets. In this case, Jane is the primary beneficiary and Susan is the contingent beneficiary who only inherits if Jane is not alive.
But, things can also be a lot more complicated than that.
Let’s say Kara decided that she wants her wife Jane to receive half of her assets, and wants to split the other half equally between her five brothers (⅕ of the remaining half for each of them). Kara could decide to name different contingent beneficiaries for each of Jane and her brothers.
So, Kara’s Will could say that if Jane predeceases her, her daughter Susan is the contingent beneficiary for Susan’s share (entitling her to half of the estate if Jane is not alive). Kara's Will could also state that if any of Kara’s brothers predeceased her, the portion of the estate that would have gone to that brother should instead be split equally among that brother’s children.
In this case, we have six primary beneficiaries (Jane and Kara's five brothers) and, depending on how many children Kara’s brothers have, potentially many contingent beneficiaries.
How do I name a beneficiary?
Naming beneficiaries is a standard part of the process of creating a Will.
When you’re naming beneficiaries in your Will, be sure to use their proper legal names.
If you’re naming a charitable organization as a beneficiary, in addition to using the proper legal name of the organization, make sure to include the Charity Registration number issued by the Canada Revenue Agency. A full list of registered charities in Canada can be found here.
What can my beneficiaries expect when I die?
Depending on whether you’ve had conversations about your Will with your beneficiaries during your lifetime, they may or may not know they stand to inherit anything from your estate.
If your Will is submitted to court for probate, your executor will be responsible for serving each of your beneficiaries with notice of their entitlement. This is a formal process that lets these people know that they have been named as your beneficiaries. You could also find out in a more informal way, but this is the first step for beneficiaries in the legal process.
The probate court will review the Will and, if satisfied that all of the requirements are met, will authorize the executor to start administering the estate. The executor can then begin the process of fulfilling the wishes contained in the Will and distributing the assets. In some cases, a Will may not need to be probated before the executor begins dealing with and distributing assets.
Here are some things to keep in mind about the executor of a Will when you’re a beneficiary:
The executor of the Will is the gatekeeper of the deceased person’s assets—they are your first and main point of contact when you’re a beneficiary
The executor needs to do a lot of legwork before you receive your inheritance—give them time to gather information from banks, lawyers, accountants, insurance companies, etc.
Depending on the nature of your inheritance, you may be entitled to see the entire Will or only the part that pertains to you
What happens if I don’t name a beneficiary?
You’re not legally required to name a beneficiary in your Will, but if you’re taking the time to make your Will, it would be quite odd not to.
If you don't have a Will or, if you have a Will but don’t name any beneficiaries, your executor must rely on the rules of your province to determine who receives your assets.
The rules of the province are strict and must be followed by the executor. Your assets may end up in the hands of people you wouldn’t have chosen. They could also end up in the hands of people you would have chosen, but not in the proportions you would expect.
Here’s what provincial rules in Ontario look like:
You have a spouse but no children: Your spouse will inherit your estate.
You have a spouse and one child: Your spouse will inherit the first $200,000 of value of your estate and the rest will be split equally between your spouse and child.
Update: As of March 1, 2021, a surviving spouse receives $350,000.
You have a spouse and more than one child: Your spouse will inherit the first $200,000 of the value of your estate, your spouse will inherit 1/3, and the remaining 2/3 will be split equally between your kids.
Update: As of March 1, 2021, a surviving spouse receives $350,000.
You don’t have a spouse but you have some children: Your children will inherit your estate in equal portions.
You don’t have a spouse nor any children: Your parents will inherit your estate.
You don’t have a spouse, children, nor any parents: Your siblings will inherit your estate in equal portions. If you have no siblings, your nieces and nephews will divide your estate.
