In an insurance policy, can a person's estate be named as the beneficiary?

If you are the holder of a life insurance policy, you may designate an individual or your estate as the beneficiary of the policy’s proceeds on your death.

However, there are significant legal and accounting issues to consider. Beneficiaries under an insurance policy receive their insurance proceeds tax free. However, if you designate your estate as your beneficiary under an insurance policy, then British Columbia probate fees of 1.4% will be assessed on the value of the insurance policy. Despite this, some people choose to designate their estate as the beneficiary of the insurance proceeds because they want to use the proceeds to help pay for the taxes payable by the estate (for example, capital gains taxes on rental properties or investments).

Anyone considering designating their estate as their insurance policy beneficiary should seek legal and accounting advice. In addition to the tax implications, designating your estate as your insurance policy beneficiary also has the potential to expose the proceeds to creditor’s claims against the estate.