In the case of a life insurance policy taken out on the life of the deceased person, the proceeds of this policy will be paid as follows: if there is a life insurance policy with a designated beneficiary, the proceeds do not form part of the estate and the designated beneficiary will receive the proceeds directly. Therefore, a life insurance policy that does not have a designated beneficiary or that is payable to the estate becomes part of the deceased person's estate.
A life insurance policy taken out on the life of a third party, of which the deceased person is the policyholder, will need to be transferred. If it is a policy with a cash surrender value, this value will need to be included in the estate of the deceased person.
Each company has its own requirements. Therefore, it is necessary to inquire with each of them, prepare the required forms, and carry out the specific procedures for each company.
Individual retirement plans, namely RRSPs and RRIFs
The surviving spouse who is a beneficiary of an individual retirement plan must transfer the funds from this plan into their own retirement plan, so that no tax is payable. Therefore, if the surviving spouse cashes in this plan, they could assume all the taxes payable on these assets.
An individual retirement plan taken out with a life insurance company or a trust company can have a designated beneficiary. In this case, the retirement plan does not form part of the deceased person's estate. The designated beneficiary will receive the amounts payable under the plan directly. On the other hand, if the retirement plan taken out with a life insurance company or a trust company does not have a designated beneficiary, the amounts payable under the plan will be included in the estate of the deceased person.
For other retirement plans, i.e. those that are not taken out with a life insurance company or a trust company, the funds deposited in these plans must be included in the estate.
Collective retirement plans
When the deceased person had an employer who offered a pension plan, it is necessary to ensure compliance with applicable legislation and the specific features of the retirement plan before liquidating the estate, due to the various laws, rules, and exceptions applicable to these plans.