When was the last time you reviewed your registered plan beneficiary designations? We often forget to revisit these designations after opening our accounts. However, failing to update beneficiaries is a common and potentially costly retirement and estate planning error that many investors make.

Here are some steps to take to spring clean your beneficiary designations, as it relates to your registered plan accounts:

Create a list of your investment accounts. Then identify which accounts permit beneficiary designations, such as your Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF) and Tax-Free Savings Account (TFSA), including any accounts through your employer.

List the beneficiaries you have named for each account.

Determine if the named beneficiary is still current.
It is possible that a named beneficiary is no longer alive, or perhaps a major life event, like divorce, has changed the status of an existing beneficiary. Be sure to revisit beneficiary designations following major life changes.

Consider whether a beneficiary should even be named.
If no beneficiary is named, assets will pass through your estate. In some cases, a beneficiary is named instead of the estate to avoid probate fees.1 While this may be ideal for tax-planning purposes, it can inadvertently create other issues. For example, if an adult non-dependent child was named as the RRIF beneficiary, the value of the RRIF will be paid directly to them, but the tax burden will fall back to the deceased’s estate, unless a provision has been made in the will. This may cause unintended estate equalization issues.

If a spouse (common-law partner) has been named, determine if there are additional considerations.
If a spouse is named as beneficiary for a TFSA or RRIF, you also have the option of naming them as “successor holder” or “successor annuitant,” respectively. Generally, the successor designation permits the continued operation of the account by the surviving spouse relatively seamlessly. For the TFSA, any income earned after your death would not be taxed. For the RRIF, there would be no tax consequences to your estate.

Seek assistance.
We are here to assist with any changes to your beneficiary designations on your registered plan accounts. As you review these beneficiary designations, we recommend considering the support of estate planning and legal advisors to help ensure your estate planning objectives will be met.

This article was originally published in the Spring 2022 newsletter, "Challenging the Trend." Click here to view.

Harbourfront Wealth Management was one of Wealth Professional Magazines 5 Star Brokerages for 2022. Wealth Professional is a free online information resource for all Canadian advice and planning professionals. This is not a paid award Harbourfront Wealth Management is not a sponsor.

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