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Covering estate costs

Life insurance can be used to pay the taxes and other expenses that your estate must cover.​​​

Life insurance can provide your estate with the ready cash needed to pay debts, taxes or other obligations. This can avoid the sale of estate assets – such as a home or cottage – that beneficiaries may want to keep in the family.

3 common estate costs

​In addition to funeral costs, your death can trigger costs to your estate that you may not have anticipated:

  1. Probate fees – The fees to settle your estate can be high depending on the province you live in. In Ontario, the fees equal almost 1.5% of your estate’s value.
  2. Tax on capital gains – You’re deemed to dispose of all capital property at death. Your estate must cover the tax on any of these capital gains.
  3. Tax on tax-sheltered savings plans – Registered plans such as RRSPs and RRIFs can be transferred tax free to your spouse’s plan, but if you don’t have a spouse, these savings become fully taxable at death.

How to use insurance to pay estate costs

Simply name your estate as the beneficiary. Your estate will pay probate fees on the insurance proceeds, but it gives your estate cash that can be used right away to help cover estate costs.


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