Do beneficiary designations override your will?
Yes, in general they do. For life insurance, RRSPs, RRIFs, TFSAs, and most pensions, the designation on the account or policy decides who receives the money, even if your will says something different. Outdated names, like an ex-spouse never removed, are the mistake seen most often. A short review after every big life change keeps the promise current.
Here is a question I ask in almost every first conversation, and it almost always gets a thoughtful pause. If something happened to you tomorrow, who would actually receive your life insurance, your RRSP, and your TFSA? Most people answer by telling me what their will says. I understand why. A will feels like the final word. But for many of your biggest assets, it is not. Years ago, you filled out a form, named a person, and signed it in about ten minutes. That quiet little form may carry more weight than your will.
The designation decides, not the will
For life insurance, RRSPs, RRIFs, TFSAs, and most pensions, the beneficiary designation attached to the account or policy decides who gets the money. In general, it overrides what your will says about the same asset. The two can point in different directions, and the designation usually wins.
That is not a flaw. In many ways, it is a strength. Money paid to a named beneficiary passes outside your estate. It usually arrives faster, it stays private instead of becoming part of a public estate file, and in Ontario those assets generally avoid probate tax, formally called the estate administration tax. The risk is a designation nobody has looked at in fifteen years.
The mistakes I see most often
The most common one involves a previous marriage. Someone divorces, builds a new life, updates their will, and feels confident everything is in order. Meanwhile, an old policy or a pension from a former job still names the ex-spouse. If that is never changed, the money can follow the old form, not the new life, creating pain at exactly the moment a family can least handle it.
The second mistake is naming your estate when you really meant to name a person. Sometimes that is done on purpose, for good reasons, so get proper legal advice first. But when it happens by accident, the asset is pulled back into the estate. It can then go through probate, take longer to reach your family, and may be exposed to estate creditors.
Naming children takes extra care
Parents name their children with the best intentions in the world. I get it. You love them, and you write their names down. The trouble starts when a child is still a minor. A young child generally cannot simply receive a large insurance payment or registered account and manage it. The money may end up court managed until the child reaches the age of majority, which may not match how, or when, you wanted them to receive it.
One option families sometimes explore is having a trust created in the will receive the money instead, so a trustee can manage it over time, according to instructions you set out. Whether that fits depends on your circumstances, so make that decision with a qualified lawyer. If you are starting from the beginning, our guide to will basics in Canada helps you get oriented first.
The TFSA detail that really matters
Now for a nuance I wish every married and common law couple in Canada knew, because one word changes the outcome. If your spouse or partner is named as successor holder on your TFSA, they inherit the TFSA itself. The account can become theirs and the tax shelter stays intact, without using their own contribution room.
If that same spouse is named as a regular beneficiary instead, they receive cash, not the TFSA itself, and the shelter is lost unless they have their own available room and move the money into their own TFSA. Same person, same good intentions, very different result. When you review your TFSA, do not just check the name. Check the role beside the name.
RRSPs and RRIFs: the asset moves, the tax bill stays
Registered retirement accounts come with their own surprise. Naming a beneficiary on an RRSP or RRIF moves the asset to that person, but it does not automatically move the tax bill. By default, your estate is generally taxed on the value at death, as if the money had been brought into income. Your beneficiary can receive the account while your estate settles the tax, shrinking what everyone else receives.
There are important exceptions, called qualifying rollovers. A rollover may apply for a spouse or partner, or in certain circumstances a financially dependent child or grandchild with an impairment, including a rollover into an RDSP. Those rules are specific, so treat this as education, not personal tax or legal advice, and get professional guidance. Who gets the account and who pays the tax are two separate questions, and a good plan answers both.
A simple review that protects the people you love
Here is the good news. Reviewing all of this takes far less time than most people expect, and it fits naturally into an annual policy checkup. List every policy and registered account you hold, including old pensions and group benefits from past jobs. For each one, write down the beneficiary, whether a backup or contingent beneficiary is listed, and for a TFSA, whether your spouse is successor holder or beneficiary. Then ask one honest question about every name. Is this still the person I would choose today?
Review those answers after the big moments in life: a marriage, a divorce, a birth, an adoption, or a death in the family. Keep the list somewhere your executor can actually find it, because a perfect plan hidden in a forgotten folder helps no one.
Friends, nobody fills out these forms hoping to create confusion. We fill them out because we love people and want them looked after. A designation is a promise you made to your family in a quieter season of life. Checking on it is how you make sure it still says what your heart means it to say. Take an hour, pour a coffee, and read the names. It may be the most loving paperwork you ever do.
See where you stand: the free RDSP readiness checker takes about a minute and shows whether an RDSP belongs in your plan and what the government could add. No signup, and no pressure.
A quick note: this post is educational, not financial advice. For guidance on your own situation, book a free conversation. You don't have to figure this out alone. I'm here to help you through every step.