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The Money Management Newsletter: Insurance Products
A word to single parents about their Life Insurance

A single parent often wishes to provide insurance coverage to be used to care for his or her underage children should the parent die while the children are young.

If the parent does not have a Will, he or she might believe that either the children should be named directly as the beneficiaries of the policy or that a trusted adult could be named who the parent would expect to "do the right thing" respecting the children's needs. This is a dangerous course of action.

If the children are named as beneficiaries, the insurer is likely to pay the proceeds into Court under the provisions of the Insurance Act (Ontario) as there is no person legally capable of giving a receipt for the payment on behalf of the children. In order to access the money for the children's use, someone would need to apply to the Children's Lawyer of Ontario. In the alternative, on the death of the parent, someone could apply to be appointed by the court as the guardian of the property of the children. He or she could then obtain the insurance proceeds. Further proceedings would be needed for the Court to approve a management plan and pay out funds for the children's care. In either case, there may be difficulty about who should apply and there will be delays and costs before any funds are released for the children's use.

If a trusted adult is named as beneficiary, there is no evidence of the intention that the proceeds were intended for the benefit of the children and the adult may keep the money for personal use.

The solutions --- (1) the Estate designated as beneficiary and a will containing a trust for the children or (2) an adult designated as beneficiary as trustee and a separate written trust arrangement for the children. The designation without the will or trust in place will not accomplish the parent's intention of providing ready funds for the care of the children in the event of the parent's untimely death.

The information in this article is general and should not be relied upon as a substitute for professional advice in specific situations.

Suzanne Michaud is a lawyer with the Mississauga, Ontario, law firm of Pallett Valo, working with clients and their other advisors in the areas of estate planning and administration. She is also the Estate Planning Consultant with Zurich Canada, providing continuing education and case consultation to Zurich's brokers-partners across Canada. Phone 905-273-3300 or 1-800-323-3781 Fax 905-273-6920 e-mail: ©Copyright 1999


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