In the course of preparing your estate plan, you will likely need to consider how to deal with registered accounts. In this discussion, registered accounts include a registered retirement savings plan, registered retirement income fund, registered education savings plan and tax-free saving account. These fall under the description of “plans” as defined by the Succession Law Reform Act, which is the statute governing this and other succession matters (and in the case of plans issued by insurance companies, the governing statue is the Insurance Act).

Designating beneficiaries can ensure that the proceeds of these accounts are paid out directly to individuals, without the need for probate to transfer the assets and without the assets being subject to probate taxes payable by your estate. If you do not name specific beneficiaries, the default beneficiary will be your estate and the asset will be subject to probate. Let’s review two methods to designate beneficiaries on registered accounts: 1) directly on the forms provided by the provider institution; or 2) in your Will

Designating on the Institution’s Forms  

When you opened the account, you were likely provided with a beneficiary form, or an area in the account opening documents that asked you to list a beneficiary/ies. Naming beneficiaries directly on the forms will ensure that the institution knows exactly who to pay out and will [generally] not require providing the Will. If the accounts change in future, you can update the forms at the institution as needed, so keeping track of your beneficiaries is simplified because the information is in one place and on file with the provider.

However, if you want to benefit minors or disabled beneficiaries who will require trusts or special planning, or if you want to name successive contingent beneficiaries in the case of a primary beneficiary’s death, the forms are limited in space, not always clear and do not provide a mechanism to outline specific instructions (at most you can name a trustee to obtain the proceeds, but you can’t specify the terms of distribution).   

Designating In Your Will

If you wish to leave registered proceeds to minors or disabled beneficiaries, or to have some protective mechanism for any beneficiary, such as a trust, you can draft designations in your Will to appoint a trustee for those proceeds and to include specify terms of distribution for the intended beneficiaries. There may be additional benefits, such as tax strategies, to employ through a registered plan designation in a Will for certain beneficiaries. For example, directing RRSP or RRIF proceeds to a lifetime benefit trust for an eligible dependant beneficiary can attain a tax deferring rollover to that trust that may not otherwise be achieved by naming the person outright on the institution’s forms.     

Note, designations that are drafted into a Will technically apply to accounts that are in existence at the time of signing the Will. This is an exception to the general rule that the Will speaks from the time of death and not the date of execution. If you designate in your Will, remember to update your Will if you change accounts or open new accounts (such as when an RRSP converts to a RRIF).

A Mills & Mills LLP estate planning lawyer can help determine the right planning of registered accounts for your estate. 

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