Canadians are much more mobile than they used to be, and it is not uncommon for an Ontario resident to purchase a policy of life or accident and sickness insurance here and designate beneficiaries who do not reside in Ontario. Consider, for example, a grandmother, now deceased, who resided in Ontario and purchased life insurance here. Her minor granddaughter and grandson reside in New York state and are the beneficiaries of the life insurance. Both grandchildren have authorized representatives under New York law who may accept payments on their behalf. Recent amendments to Ontario's Insurance Act will make it easier for insurers to pay out benefits to minors pursuant to life and accident and sickness insurance policies and obtain a valid discharge. These amendments offer insurers a clear and cost-effective process for paying out the proceeds, eg. of a policy of life insurance, and obtaining a valid discharge where a beneficiary is a non-resident minor and has an authorized representative. As many financial advisors are licensed to sell both insurance products and securities, we anticipate that these changes will be of broad interest.
Prior to the amendments to the Insurance Act, section 220 (life insurance) there was no provision that permitted an insurer to pay benefits to an authorized representative of a minor appointed pursuant to the law of the minor's place of residence, eg. to guardians or custodians for a minor appointed pursuant to New York state law, as in the above example. Thus an insurer who "admitted liability" for insurance money directly payable to a minor (eg. under a life insurance policy), was required to pay the money into court to the minor's credit. Section 321 of the Act (accident and benefit insurance) was a little broader, in that benefits had to be paid into court only if there was no person capable, authorized and willing to give a valid discharge. However, in neither case did the Act explicitly grant an insurer a discharge for funds paid to a non-Ontario authorized representative who was allowed to accept payments on behalf of the beneficiary under the law of the jurisdiction in which the beneficiary resides.
The recent amendments to sections 221 and 322 of the Act now clearly provide, among other things, that an insurer is discharged to the extent of the amount paid on behalf of a minor to an authorized representative who has the authority to accept payments on behalf of that minor, pursuant to the law of the place where the minor resides. There is no counterpart provision in the Succession Law Reform Act ("SLRA") with respect to the designation of beneficiaries to "plans" (including RRSPS and RRIFs) but one can hope that the Province will at some point amend that Act to include one.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
