Successor holder and/or Beneficiary | General financial discussion | Discussion forum

It's important to remember, though, that a spouse successor does not have to cash in the registered plans and can simply transfer them to themselves and carry on as before.

In our case we have named the Spouse as Successor Holder for TFSA and Successor Annuitant for LIF and RRIFs. In addition named our adult children as Contingent Beneficiaries should the Spouse pre-decease the Account Holder. The Contingent Beneficiaries and their respective shares are consistent with our Will designations. Legal guidance we got is the TFSAs, LIF and RRIFs can move outside Probate. Norman 1 is correct the Financial Institution may hold things up until the Will is Probated but the values of the TFSAs, LIF and RRIFs need not be included in the amount declared for Probate.

As an executor, I would consider not releasing any RRSP, LIRA, TFSA, etc. funds until I had the Will probated and the Final T1 return done. Partly for reasons given already, e.g. conflict between a subsequent Will and a stale beneficiary form.... But also where a RRSP, LIRA, etc, must be collapsed and income taxes are due. The income taxes must be paid from estate assets, and maybe from the RRSP distributions themselves.

IOW, it depends on size of the RRSP relative to the rest of the estate, the other asseets in the estate, named beneficiaries of the RRSP vs other estate assets, etc.

Top It Up said

My OWN experience as executor of two wills - neither of the 2 banks or the 1 credit union involved would "budge" without probate - NO further discussion, period.  

Those who owe the deceased, including financial institutions, would like to pay what is owed and pay that only once. Paying under the direction of an executor appointed by a probated will gives them that legal discharge, even if the probated will later is found to have issues.

There was a case a few years ago in southwestern Ontario where the children applied for probate of their father's will. A woman showed up at the court hearing and produce a marriage certificate dated subsequent to the execution of the will. Probate was refused.

Unknown to the children, the father had remarried and the woman was their stepmother! That subsequent marriage revoked the will.

I think probate of the will is always required in BC, regardless of the size of the estate. Otherwise, what is releasing the financial institution of its obligations to the deceased? If someone else shows up later with a different will and that was actually probated, the financial institution would have to pay up a second time.

Either the will is probated or, as AltaRed points out, the financial institution has to be willing to take on that risk.

There is little excuse not to probate in BC when the estate is under $25,000. Probate tax is waived when the estate is under $25,000. The regular $200 court filing fee is also waived.

There is a special case in Manitoba with the Manitoba credit unions. Subsection 41(3) of The Credit Unions and Caisses Populaires Act could release a Manitoba credit union in certain cases:

Payment on death

41(3) Where a member of a credit union dies and there is no executor of a will of the deceased member or administrator of the estate of the deceased member, the credit union may, upon receipt of an affidavit or such other proof of death or proof of claim as may be required by the credit union, pay a prescribed amount out of moneys standing to the credit of the deceased member to the person who appears to be entitled to the amount of the deceased member's interest and payment made under this section releases the credit union from any further liability with respect to the moneys so paid.

But, the prescribed limit in Regulation 316/87 is just $5,000:

Payment of prescribed amount on death of a member

7 For the purposes of subsection 41(3) of the Act, the maximum amount a credit union may pay out of moneys standing to the credit of a deceased member is $5,000.

I've never objected to the concept of probate for each and every estate. People do a lot of really crazy things with respect to impulsive creation of sloppy and incomplete wills, or no wills, or changing stuff whenever they get pissed at someone, unexpected creditors, lurking ulterior motives by a family member or beneficiary, etc, etc. I've heard a wide range of disappointing behaviour from fellow boomers who have had to live it with estates of parents/siblings, etc.

Ontario government says this in FAQ:

"Are Registered Pension Plans (RPPs), Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs) and Tax Free Savings Accounts (TFSAs) subject to estate administration tax?

Yes, RPPs, RRSPs, RRIFs and TFSAs are included in the value of the estate of the deceased for purposes of calculating estate administration tax. However, RPPs, RRSPs, RRIFs and TFSAs with a beneficiary designation or beneficiary declaration which pass directly to that beneficiary and not through the estate are not subject to estate administration tax."

http://www.fin.gov.on.ca/en/ta.....q.html#Q21

Perhaps the difficulty is in distinguishing what is subject to probate and what is subject to the tax that accompanies it (Estate Adminnistration Tax).

Probate refers to the "proving" of a will, i.e. to establishing its validity according to law. So, in that sense, the registered plans would be included. However, with the proper beneficiary designations, these plans will not be subject to the tax. As long as there is a spouse, properly designated, there is no problem.

I am a little less clear about what happens on the death of the second spouse. it would appear that the RSP/RIFs are then fully taxed, both as Estate Adm (as they must be liquidated at this point) and also as Income Tax. In the absence of a surviving spouse, the TFSA, unlike the RSP/RIF, can be passed to any designated beneficiary without triggering either tax, but the income on it from date of death is subject to income tax until such time as the recipient can put it in their own TFSA, if at all. I think, but am not sure, that there is still no estate tax on it. However, for a non-spouse who has filled up their TFSA from other sources, this money will eventually become part of their estate (if not spent), and that money will then be subject to Estate Admin Tax but will always avoid income tax on the principal that was inherited. I'm sure someone will correct me if I'm wrong about this.

I am not a lawyer.

Thanks Loonie and Bill.
I've come up with an idea for an elderly friend of mine (honest!), who wants to leave her home jointly to her two children who live with her. She doesn't have any savings but if she gets a line of credit on her home to buy TFSAs, names her children as beneficiaries, then she should pay less Estate Admin Tax as the encumbrance will be deducted from the value of the estate? Is this correct, and legal?