The Form You Filled Out Years Ago Could Change Your Estate Plan

You updated your will after the wedding. You made sure the children were included. You put the signed documents somewhere safe and felt reasonably confident that things were in order.

But what about the beneficiary form you filled out when you opened your RRSP? Or the life insurance paperwork from your first week at work?

Those documents may have been signed in a very different chapter of your life. They can also affect where a substantial amount of money goes when you die.

An estate plan is easier to understand when you look at the will and the beneficiary designations together. Reviewing one without the other can leave a gap that nobody notices until it matters.

Some money may pass outside the will

Certain registered plans and life insurance policies allow you to designate a beneficiary. A valid designation may direct the proceeds to that person rather than into the estate for distribution under your will, subject to the applicable rules.

Imagine someone has two adult children. Their will divides the estate equally, but a significant account names only one child. If that designation is effective, an equal division under the will does not necessarily produce an equal overall inheritance.

That may be precisely what the parent wanted. Perhaps they were balancing other gifts. The problem arises when they thought the will controlled everything.

Before deciding your plan is fair, make sure you are counting the same assets your documents actually distribute.

A new will does not automatically tidy up every old form

Manitoba’s Beneficiary Designation Act allows designations through a qualifying written instrument or a will. But the wording and timing matter. A designation in a will must expressly relate to a plan, and a revocation must expressly address the designation. A general clause dividing the estate is not a reliable way to change an old beneficiary form.

The Act also requires a warning that marriage or divorce does not automatically change a beneficiary designation made by form. If your relationship has changed, check the designation instead of assuming the paperwork changed with it.

Life insurance has its own rules under Manitoba’s Insurance Act. An irrevocable designation or a legal obligation arising from a family agreement can also restrict what you may change. Get advice before replacing a name where those issues might apply.

The same person can be named in different ways

A TFSA is a good example. A spouse or common-law partner may be named as a successor holder, which is different from being named as a beneficiary.

A successor holder takes over the TFSA, allowing it to continue as a tax-sheltered account. A beneficiary receives a benefit under different rules, and growth after death may need separate tax treatment. Ask your institution which designation is actually recorded and whether it fits your plan.

Pensions are another reason not to treat every form alike. A qualifying spouse or common-law partner may have statutory death-benefit rights that take priority over another named beneficiary, unless a valid waiver or another applicable exception changes the result. Confirm the rules with the plan administrator.

The useful question is not just “Whose name is there?” It is “What happens under this particular account or policy?”

The person receiving the money and the tax bill may be different

An RRSP left to an adult child can create an issue families do not expect. Generally, the value at death is included in the deceased person’s income, subject to available exceptions and rollover rules. The proceeds may nevertheless be paid directly to the named beneficiary.

That can leave the estate needing money for tax while the account proceeds have gone elsewhere. Beneficiary liability can also arise; this is not a reason to assume the recipient is insulated from the tax consequences.

Before using a registered account to balance gifts between family members, have the after-tax outcome reviewed. Two assets with the same statement balance may not leave the same amount available to the people inheriting them.

Do a beneficiary review you can actually finish

Gather statements for your RRSPs, RRIFs, TFSAs, pensions and life insurance, including workplace coverage. Ask each institution to confirm its current records in writing. Do not rely on what you remember selecting online years ago.

For each account or policy, record:

• The beneficiary’s name, relationship and share.
• Any alternate beneficiary and when that alternate would receive the benefit.
• Whether the designation is revocable or irrevocable.
• Whether special spousal, successor-holder or plan rules apply.
• The date the designation was made or last confirmed.

If you have named a minor, ask how the money would be managed and paid. Do not assume the trust provisions in your will automatically govern a direct beneficiary payment.

Bring the list to your estate-planning appointment. Include any separation agreement, support obligation or other document that may affect the choices.

Review the whole picture after life changes

A separation, divorce, new child or death in the family is a good reason to check again. So is changing jobs or moving an account to a different institution.

You do not necessarily need to change everything. You need to confirm that the arrangements still say what you think they say.

If your will has been updated but your beneficiary forms have not been reviewed in years, contact TLR Law. We can help you look at the documents together and identify where legal, financial or tax advice is needed before you make changes.