All About Estates

Dealing with U.S. Life Insurance Policies in Ontario Estate Plans

After 4 years as a law clerk in the Fasken’s Private Client Service Group and Trust, Wills, Estates and Charities Group, I am changing tracks and joining TD Wealth as an Executive Trust Officer. While at Fasken I had the pleasure of working on many interesting and challenging matters along side some amazing people, so today, my last day, writing my final All About Estates Blog (“AAEB”) feels bitter sweet.

In this blog, I want to share some of my experiences over the last few years in dealing with U.S. life insurance policies in the context of estate planning for our clients now living in Ontario.  In Ontario, it is a very common practice to include beneficiary designations for life insurance policies in Wills.  In part, this is because it allows us to include specific trust provisions (ie. spousal trusts, trusts for minors, persons under disability, etc.) which cannot be included in the usual beneficiary designation forms and it is an effective way to ensure that the proceeds thereof will not form part of the estate of the insured, thereby avoiding estate administration tax (probate fees).

After making inquiries with a number of U.S. insurance companies to make sure that a beneficiary designation made in a Will would be dealt with in the same way, the most common response has been that the institution will, in all likelihood, require the Will to be probated.  Given that one of the goals is to avoid the probate process, further inquiries were required.

I have since reviewed many U.S. life insurance beneficiary designation forms and what’s interesting is that their standard beneficiary designation forms are much more elaborate than ours (in Ontario) and commonly include the ability to: make a distribution to the issue of a deceased beneficiary in equal shares per stirpes; pay out to an inter vivos trust; and more recently, I have seen forms that include the ability to pay to a named trustee to be held by them for a named beneficiary on terms which are included in the form, ie. to hold proceeds in trust until the beneficiary attains the age of majority; including a direction as to the payment of income and capital, etc.

Although these forms still aren’t perfect, they will in most cases be sufficient and will certainly be better than the alternative probate option.  Of course, there are other options which I can’t elaborate on in this blog, but this is a simple and economic possibility.

Key takeaways:

  1. when dealing with assets in other jurisdictions, never make assumptions that they can be dealt with the same way as in Ontario – always ask the question, and
  2. to my AAEB colleagues, I look forward to reading your blogs and hopefully working with you in my new role.

All the best!

About Tracy Parkinson
Tracy Parkinson is a Law Clerk in the Private Client Services Group and the Trusts, Wills, Estates and Charities Group at Fasken and she has worked in the legal profession for over 28 years. Tracy has extensive experience in complex, high-value estate planning and estate and trust administration. Tracy is an affiliate member of STEP Canada and has received a Certificate in Estate and Trust Administration (CETA). With this Certificate, Tracy has received professional recognition as a specialist in estate and trust management. Tracy is also an associate member of the Institute of Law Clerks of Ontario and a member of the Society of Trust and Estate Practitioners (STEP). She can be reached at tparkinson@fasken.com

1 Comment

  1. Mary Catharine Lawlor

    February 19, 2021 - 11:39 pm
    Reply

    Good luck at your new post.

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