Smith Falconer Financial Group (SFFG) takes pride in our inter-generational client relationships. We support clients through the financial and estate planning process, which secures the present with deep, solid roots, and reaches out to protect the future for generations to come.

Beneficiaries are a common topic when discussing financial and estate planning. Below, we will provide more context on considerations when naming a beneficiary.

The beneficiary or beneficiaries of your assets, are the individuals, trusts, corporations or charitable organizations to whom you choose to leave your property, after your death.

When can you designate or name beneficiaries?

Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), Tax-Free Savings Accounts (TFSAs), segregated funds, annuities and life insurance policies, are the main assets discussed when considering beneficiaries.

For the purpose of this blog, we will be discussing naming a beneficiary on registered plans outside of Quebec. There may be restrictions on naming a beneficiary for a Locked-In Retirement Account (LIRA) or Life Income Fund (LIF). You should check with your tax or legal advisor in your province of residence about these plans.

Option 1: Naming your spouse or common-law partner as your beneficiary

RRSP – When a spouse or common-law partner is named as a beneficiary on an RRSP, assets usually can be rolled over free of tax to the survivor’s RRSP.

RRIF – When a spouse or common-law partner is named as the successor annuitant, they should be able to take over the plan when death occurs.

TFSA – When a spouse or common-law partner is named the successor holder, they should be able to take over the TFSA when death occurs.

However, if a spouse/common-law partner is not named as the successor annuitant or successor holder respectively, and is just named as a beneficiary of the RRIF or TFSA, there may be a delay in the transfer of plan assets and taxes may be found owing for the period of time between date of death and ownership change. Naming your spouse or common-law partner as successor annuitant or holder (and following the tax rules) should ensure that the resulting assets fall outside of your estate, and can be efficiently rolled over, with tax deferred until the death of the surviving spouse or common-law partner.

If the assets can successfully pass outside of your estate, probate for these assets (and the payment of any applicable estate administration tax) will not be required.

Option 2: Naming a beneficiary other than your spouse

Naming another individual, trust, corporation, or charitable organization as your beneficiary should ensure that the resulting assets are not included in your estate. This should also assist with reducing any probate taxes that are payable. Some rollovers are available for beneficiaries who are minors or who are dependent on the deceased because of an infirmity.

However, it is important to note that for registered plans. there will be tax resulting to the beneficiary between the date of death and distribution. Therefore, to ensure that all of the taxes arising from death are paid by the your estate, it may make sense to not name beneficiaries on registered plans and allow the plan assets to form part of the estate.

Option 3: If you don’t name a beneficiary, the proceeds of a registered plan fall into your estate

Call to Action!

We are pleased to be hosting our second event with Dr. Tom Deans on Tuesday, September 10th, 2024. Tom is “widely considered the preeminent thought leader and speaker on generational wealth”. He will speak to his newest book, “The Happy Inheritor”, which he urges anyone expecting to leave or receive an inheritance, to read.

We are always here to provide guidance on financial and estate planning. To that end, we partner with trusted specialists to cultivate your long-term security and growth. We are always happy to facilitate a referral, where appropriate.