Naming your children as beneficiaries on your life insurance policy seems like a natural and caring choice. When the children are minors, however, it can create significant practical problems that are easily avoided with a small amount of planning.

The Problem with Naming Minor Children Directly

In Nova Scotia (and across Canada), a minor child cannot legally receive a direct insurance payment. If you die and a minor child is named as beneficiary, the insurance company cannot pay them directly. The funds will be paid to the Public Trustee of Nova Scotia, who will hold and manage the money until the child turns 19.

This creates several problems:

  • The Public Trustee charges fees for this administration
  • Investment discretion rests with the Public Trustee, not your family
  • When the child turns 19, they receive the full amount as a lump sum — regardless of whether they are mature enough to manage it
  • Your surviving spouse or guardian cannot access the funds for the child's day-to-day needs without Public Trustee approval

Better Options

Name your spouse or partner as primary beneficiary and the estate as contingent. The insurance pays to your spouse, who can manage it directly. If your spouse predeceases you, it falls to the estate and your Will governs distribution. This works well for most families.

Name the estate as beneficiary and address distribution in your Will. Your Will can create a testamentary trust for the children, with a trusted adult as Trustee, specifying how and when the funds are distributed. This gives you maximum control over how children receive the money and at what age.

Designate a trustee for the minor beneficiary — some insurance policies allow you to name both a minor beneficiary and a trustee to receive the funds on their behalf. Check with your insurance company whether this option is available under your policy.

Review Your Beneficiary Designations

Beneficiary designations on insurance policies and registered accounts (RRSPs, TFSAs) operate independently of your Will. Updating your Will does not change your insurance designations. Both need to be reviewed together whenever your family situation changes.