Beneficiaries

Who Gets What

In this article:

What is a beneficiary?

What do beneficiaries receive?

Who qualifies as a beneficiary?

Primary and contingent beneficiaries

How do I name a beneficiary?

What can my beneficiaries expect when I die?

What happens if I don’t name a beneficiary?

Related Articles:

What information is a beneficiary of a Will entitled to?

What does it mean to make a beneficiary designation?


What is a Beneficiary?

A beneficiary is a person or charity named in a Will that receives some (or all) of your assets upon your death. As the Will maker, you can leave all assets to one beneficiary, or you can name multiple beneficiaries who will inherit various assets from your estate.

In a broader sense, a beneficiary is anyone who gains and/or profits from something.

You may have heard the term “beneficiary” in connection with a life insurance policy or registered investment accounts. In those cases, a person names beneficiaries to receive something following their death.

The same is true with a Will. The beneficiaries you name for those policies or accounts can be the same or different than the beneficiaries of your 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 specific investments) 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 what’s not:

  • Jointly owned property
  • Trust interests
  • Insurance policies that name a beneficiary (outside of the estate)
  • Stocks or bonds that are set to transfer to someone else upon your death

Here are some common items beneficiaries may receive as part of a Will:

Personal Property

These are items of personal property that can be gifted to a specific beneficiary.

If you own any meaningful personal items, you’ll need to specify who should receive them upon your death.

Some common gifts include:

  • Jewelry
  • Art
  • Cars
  • Family heirlooms
  • Family albums and photographs
  • Books
    photo album: beneficiary

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.

Charitable donations

Charities can be a beneficiary in your Will.

Charitable donations, also known as legacy gifts, are sums of cash or a percentage of your estate that is left to a charitable organization. When you leave a percentage of your estate, the organization will receive the cash value equivalent based on the total value of your assets.

Cash

You can leave money 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 leave money as part of the “residue” of your estate. The residue is the part of your estate that remains after all gifts have been made, and it’s often represented in shares. The amount of money a beneficiary receives will be based on the total value of your estate and how many shares need to be distributed.

An example: after your debts and taxes have been paid, and all gifts and charitable donations have been satisfied, there is $100,000 left in your estate. You’ve specified in your Will that you want to split the “residue” 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 will receive $50,000 from your estate.

Who qualifies as a beneficiary?

A beneficiary can be any of your loved ones or a charitable organization 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
  • Neighbours
  • Other family members
  • Charitable organizations

Heads up: 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 is held in trust by an estate trustee. Some money can be distributed before the age of final distribution as long as the Will allows for it.

If you have a common-law partner, it’s important to, first, have a Will, and to include your partner as a beneficiary. 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 your assets.

A “contingent beneficiary” is next in line.

In your Will, you could have one primary beneficiary and one contingent beneficiary. You could have five primary beneficiaries and five contingent beneficiaries or pretty much any other combination.

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.

But, it could 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 also wants to split the other half equally between her five brothers (⅕ of the remaining half for each of them). For each brother, Kara could name contingent beneficiaries.

So, Kara’s Will would 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 any of Kara’s brothers predeceased her, the amount 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 the five brothers) and, depending on how many children there are between all of Kara’s brothers, many, 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 to receive probate, your executor will be responsible for serving your beneficiaries with notice. 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 your wishes and distributing your assets. Some Wills may bypass probate court if a person’s total estate is modest, but each province sets different amounts for this exemption.

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

If a loved one has died and you haven’t been notified that you are a beneficiary, there are several options available to you for confirming information in a Will:

  1. Talk to the executor. They are, after all, the person with the answers.
  2. Make a request in writing to the executor. If you’ve tried to have a conversation with the executor and you’re not getting anywhere, you may need to start creating a paper trail for future reference.
  3. Request a copy of the Will from the probate court (which can only be done after probate has been granted) and consider hiring a lawyer to explain its contents.
  4. If the Will has not gone to probate court, you’ll then need to submit a written request to the executor via a lawyer. Consider this carefully––you may need to file a lawsuit, and unless you’re a direct family member of the deceased, your chances of success may not be high.

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 to decide not to.

If you have a Will but don’t name any beneficiaries, your executor will rely on the rules of your province to distribute 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.

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.

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.