What are Beneficiary Designations?
RRSPs, TFSAs, Insurance Policies and More
When preparing a Will, many people assume that all of their assets will be distributed according to its terms.
In reality, this is not always the case.
Certain assets may pass directly to a named beneficiary without forming part of your estate. These are commonly referred to as beneficiary designations.
Common examples include:
RRSPs
RRIFs
TFSAs
Life insurance policies
Pension benefits
Where a valid beneficiary designation exists, the asset will often pass directly to the named beneficiary rather than through your estate.
In many cases, this can simplify the administration of an estate and may reduce the assets requiring probate.
However, beneficiary designations should never be viewed in isolation.
Keeping Your Estate Plan Coordinated
One of the most common estate planning mistakes is failing to coordinate beneficiary designations with a Will.
For example, imagine that your Will leaves your estate equally among your three children.
Years earlier, however, you named only one child as the beneficiary of your RRSP.
Unless you intended that result, your overall estate plan may no longer reflect your wishes.
For this reason, beneficiary designations should be reviewed whenever you prepare or update your Will.
When Should You Review Your Designations?
It is often appropriate to review beneficiary designations following significant life events, including:
marriage;
separation or divorce;
the birth of children or grandchildren;
the death of a beneficiary; or
significant changes in your financial circumstances.
An outdated designation can sometimes produce unexpected or unintended results.
Naming Minor Children
Special care should also be taken when naming minor children as beneficiaries.
Although there are circumstances in which this may be appropriate, receiving significant assets outright at the age of majority may not always reflect your intentions.
In some cases, a trust created under your Will may provide greater flexibility and protection.
Every Asset Deserves a Second Look
Beneficiary designations are often completed when an account is first opened and then forgotten for many years.
Yet these simple forms can have a significant impact on how an estate is ultimately distributed.
Reviewing your beneficiary designations as part of a comprehensive estate plan helps ensure that your assets pass to the people you intend, in the manner you intend.
If you would like assistance reviewing your beneficiary designations or preparing a comprehensive estate plan, Tonelli Estate Law would be pleased to assist - BOOK A FREE CONSULT TODAY.
This article is for general informational purposes only and does not constitute legal advice.
