One of the difficulties that comes when a loved one passes away is taking care of all the financial issues associated with the situation. It's not usually something that you want to deal with, but the reality is that you need to do what you can to get your loved one's affairs in order. Additionally, since there might be costs related to the death of your loved one, it makes sense to look into what avenues you have in terms of defraying those costs.
The Canada Pension Plan offers a death benefit to be paid out if the deceased has been a contributor. While you might not be feeling particularly good about applying for this death benefit following on the heels of someone close to you, it is still a good idea to make the effort. Here are some of the things you should know about the CPP death benefit:
Who Receives the CPP Death Benefit?
First, understand who is eligible to receive the CPP death benefit. If the deceased has an estate, the benefit is paid to the estate. In these cases, the administrator named by the court, or the executor of the will, is who applies for the benefit.
However, there are cases in which the deceased does not have an estate. In these situations, the CPP death benefit can be paid to one of the following three entities:
- Whoever paid for the deceased's funeral expenses. The death benefit is mainly designed to offset funeral expenses, so it makes sense that it would be paid out to the person or institution who covered these costs.
- Surviving partner: The spouse or common-law partner left behind by the deceased can also apply for, and receive, the CPP death benefit.
- Next of kin: Finally, if the other two circumstances aren't met, the deceased's next of kin can apply for the death benefit.
Often, someone who receives the death benefit meets more than one of the requirements above. If there is a surviving partner, it makes sense that he or she likely paid for the funeral, so claiming the benefit can help ease some of the financial burden associated with the passing of a loved one.
If the death benefit is to be paid out, certain requirements must be met. The deceased has to have contributed to the CPP for at least three years. Additionally, if the contributory period for the deceased exceeded nine years, contributions must have been made in the lesser of either one-third of the calendar years in the contributory period, or made a contribution in at least 10 calendar years.
If the minimum is made, a death benefit paid on behalf of the deceased can be expected. This benefit depends on a number of factors, but is capped at $2,500 for 2013 (the average payout as of July 2013, according to Service Canada, was $2,282.58). You might not be eligible to receive the maximum amount of the death benefit, but if you disagree with the amount you are sent, you are allowed to appeal.
If a loved one has passed on, you need to do what you can to ease the financial strain, and that might include applying for the CPP death benefit.