How to make your Life Insurance work for you

Beneficiaries: Who is the life insurance for?

The beneficiary is whoever is named (designated) under the policy to receive the insurance money on your death.

Do you want to name a beneficiary (e.g., spouse), or leave the money to your estate or to a trust? If the money is left to your estate, it will be subject to probate fees when the estate is settled. If you choose a trust, be sure to seek tax advice.

Creditor Protection

The beneficiary designation affects whether or not insurance proceeds are protected from your creditors. Provincial insurance laws provide that where a spouse, child, grandchild or parent is named as the beneficiary, the insurance money is exempt from seizure by any creditors you may have.In Quebec, the beneficiary must be related to the policyholder. In other provinces, such a beneficiary must be related to the person whose life is insured.

This special protection includes adopted children in most provinces, but it does not apply to an ex-spouse unless he or she has been named an irrevocable beneficiary.

Irrevocable Bene ciary

You may name an irrevocable beneficiary or an irrevocable trust. This means that you, as the policyholder, can’t change or revoke that beneficiary without the latter’s consent. The money is protected from your creditors and doesn’t become part of your estate. (In Quebec, a spouse is considered an irrevocable beneficiary, and divorce automatically cancels that preferred status.)


Note that a designation in a will does not override an earlier beneficiary designation under an insurance policy, unless the will specifically identifies the insurance policy in question. (However, even a specific will would not override an irrevocable beneficiary designation.) In one court case, a man, in his will, had named his present wife as sole beneficiary to his estate. But he hadn’t changed the appointment of his former wife as beneficiary in his life insurance policy or identified the policy in his will. The court ruled that the former wife should get the money.

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