If the deceased named a beneficiary on a life insurance policy on the deceased’s life, the surviving beneficiary receives the proceeds directly. The insurance proceeds are not included in the value of the estate for purposes of calculating probate fees. However, if the beneficiary has predeceased and no contingent beneficiary has been named, the insurance proceeds are payable to the estate and are included in the value of the estate for probate purposes.
An ‘insurance trust declaration’ provides a means to avoid probate fees on insurance proceeds while allowing the proceeds to be dealt with as part of a trust. The declaration may be included in a Will or may be in a separate document. A Saskatchewan case has raised the question as to whether an insurance trust declaration in a probated Will is effective in avoiding probate fees on insurance proceeds. As a result of this case, some Ontario trust and estate practitioners recommend that the insurance trust declaration not be included in a Will that will be probated. Either an insurance trust declaration is drafted as a separate document or multiple Wills (a Primary Will and a Secondary Will) are signed. The Primary Will includes assets that require probate while the Secondary Will includes assets which do not require probate, such as insurance proceeds, household goods, and shares in a private corporation.
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Blog posts pre-dated December 1, 2015 were originally published under Neff Law Office Professional Corporation.
