Can only have either a Successor Holder or Beneficiary | Tax Free Savings Accounts | Discussion forum

I have noticed an apparent lack of cooperation on this kind of issue from time to time in regards to RRSPs.

TD and Scotia allow both designations for TFSAs, so probably all BigBanks do.
http://www.tdwaterhouse.ca/doc.....529214.pdf
http://www.scotiabank.com/itra.....a_tfsa.pdf

Which bank/CU are you dealing with?

My understanding is that with TFSA, the spouse (Successor holder) can roll the TFSA into one in their own name and retain its taxfree status for the future.
With a Beneficiary it gets transferred directly to beneficiary, tax-free, but does not retain its taxfree status in the hands of the beneficiary unless they have TFSA contribution room of their own to fill.
However, if it had to go to estate, I would think it could be subject to probate tax?
http://www.ey.com/CA/en/Servic.....FSA-holder
http://www.cra-arc.gc.ca/E/pub.....l#P44_1119

AltaRed may be correct, but if someone has to argue it through with them in the end, with the risk that they still wouldn't agree, well, who needs that?

PT is not very proactive on this front. I had to request a successor holder form and then I had to ask them to send me verification that they had it on file. I have not asked for a beneficiary designation.

I would just take one of the forms that one of the BigBanks use (as above) and change it to put in PT info. You can be sure a lawyer has looked at those forms already. Then send it to them by courier - one that will provide you with a receipted signature. And then I would also ask for verification that they received it. You can't count on banks with such details, it seems. TD "lost" my power of attorney form sometime between 1991 and 2000, although it was in active use in 1991. Not surprisingly, they've never found it.

Good idea to also put it in your will.
But, really, who wants the uncertainty and the hassle?

I would also make written complaints up through the ladder, beginning with .http://www.peoplestrust.com/ab.....-services/
Really, what you want is for them to update their policy.

Banks generally state the complaints hierarchy on their websites, but PT does not. I am not sure if being a "Trust" means they are not part of that system, which normally culminates in a federal body, or whether they just don't want you to know.

They can handle either a successor holder designation or a beneficiary designation on their TFSA's. So, they have the administrative processes in place to handle the legal intricacies of both.

Some issue with the computer bookkeeping system at Peoples Trust? Maybe there's only one place in the computer record for TFSA accounts to hold either a successor holder or a beneficiary?

One of the major points of a successor or beneficiary designation is precisely that it is not subject to probate. I am no lawyer but I don't think the will can override this, no matter when it was written, as it has no jurisdiction where there is a designated beneficiary who can accept the TFSA. When there is a successor / beneficiary so designated, it can be transferred immediately, upon presentation of the death certificate, and can be done without waiting for probate. This only serves to reinforce that you need to be able to do the designations.

Loonie said
One of the major points of a successor or beneficiary designation is precisely that it is not subject to probate. I am no lawyer but I don't think the will can override this, no matter when it was written, as it has no jurisdiction where there is a designated beneficiary who can accept the TFSA. When there is a successor / beneficiary so designated, it can be transferred immediately, upon presentation of the death certificate, and can be done without waiting for probate. This only serves to reinforce that you need to be able to do the designations.

I had the same understanding until I looked into it further.

Just because an RRSP or TFSA could be excluded from the estate that requires probate doesn't mean it always is. True, a financial institution does not have to wait for probate to transfer the TFSA according to the successor holder or beneficiary designation once it receives a death certificate. But, who would be liable if it turns out that the probated will revoked the original designation, named someone else as the beneficiary, and the previous beneficiary spent the money?

I found that a will can revoke designations on an RRSP or TFSA. For example, this is from The Beneficiary Designation Act (Retirement, Savings and Other Plans) Act from Manitoba. Section 4 allows a will to revoke a designation on a plan. Section 5 specifies that where there's both a will designation and a plan designation, the later designation applies if the two are inconsistent:

Designation and revocation by participant

2 A participant may designate a person to receive a benefit payable under a plan on the participant's death

(a) by an instrument signed by the participant;

(b) by an instrument signed by another on the participant's behalf, in the participant's presence and on the participant's direction; or

(c) by will;

and, subject to section 12, may revoke the designation by any of those methods.

Designation by will

3 A designation in a will is effective only if it relates expressly to a plan, either generally or specifically.

Revocation by will

4 Subject to section 12, a revocation in a will of a designation made by instrument is effective to revoke the designation only if the revocation relates expressly to the designation, either generally or specifically.

Later designation prevails

5 Notwithstanding The Wills Act but subject to section 12, a later designation revokes an earlier designation, to the extent of any inconsistency.

I found this Ontario case mentioned in a July 2010 publication Making a New RRSP or RRIF Designation in Your Will - Beware! from Arbuckle Financial Services:

In 2008 this issue came up in a court case where the original RRIF beneficiary (changed by a later will designation) was disputed in Ontario Superior Court in Ashton Estate v South Muskoka Memorial Hospital Foundation.

The facts are follows. In 1998, Mr. Ashton signed a beneficiary designation form for his RRIF in favour of his children. In 2001 he executed a will in which his eight children were entitled to 95% of his estate in unequal shares. The will included a general clause by which he revoked all wills and testamentary dispositions previously made. When Mr. Ashton died in 2007 there was a dispute as to whether the general revocation clause in his 2001 will constituted a valid revocation of his 1998 beneficiary designation in his RRIF as required pursuant to the Succession Law Reform Act (SLRA). The SLRA provides that A revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically. The question was whether the general clause in the will was specific enough to cancel the original RRIF designation. The court decided that it was sufficient enough to meet the conditions of the SLRA but most lawyers are unhappy with the decision and uncertain about its application. The case seems to indicate that any revocation in a will should be sufficient to satisfy the SLRA but the legal fraternity is not so sure. The case seems to ignore the fact that the SLRA requires that the new designation must “expressly” refer to the original designation either generally or specifically but in the Ashton case that certainly does not seem to have been the case

I'm glad I don't live in MB in this case!

However, since I do live in Ontario, the case law cited seems very problematic. From what we are told of this case, I would agree with the dissenting legal fraternity. It doesn't seem to me that the will referred to the RRIF at all. If the criterion is 'expressly', then surely it ought to refer in some fashion.

However, we are left with the impression that whichever side lost out, probably the children, did not appeal, which is unfortunate.

Ultimately, in my view, someone would have to answer the question of why our laws allow both wills and designated beneficiaries if it is not intended that both should be honoured. Since both are provided for, it seems to me that the criterion of explicitness is crucial in deciding if one could be interpreted as overriding the other, and that a narrow definition is in order. In other words, in order for a will to override a designated successor holder or beneficiary, the will would have to explicitly say so. Otherwise, it makes no sense to allow two different methods of specifying one's intentions.

Lawyers should take heed and frame wills accordingly.

Loonie said
...

However, since I do live in Ontario, the case law cited seems very problematic. From what we are told of this case, I would agree with the dissenting legal fraternity. It doesn't seem to me that the will referred to the RRIF at all. If the criterion is 'expressly', then surely it ought to refer in some fashion.

However, we are left with the impression that whichever side lost out, probably the children, did not appeal, which is unfortunate.

I'm not sure the respondents would have won the appeal.

The exact Ontario requirement is in section 52, paragraph 1:

52.(1) A revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically.

The full text of the May 2008 Ontario Superior Court of Justice decision is here. It appears that the will had a general statement that revoked "all wills and testamentary dispositions of every nature or kind whatsoever made by [the testator]."

The judge ruled that since the beneficiary designation on the RRIF is a testamentary disposition, the general statement in the will, executed in 2001, included and revoked the RRIF beneficiary designation, made earlier in 1998.

...
Ultimately, in my view, someone would have to answer the question of why our laws allow both wills and designated beneficiaries if it is not intended that both should be honoured. Since both are provided for, it seems to me that the criterion of explicitness is crucial in deciding if one could be interpreted as overriding the other, and that a narrow definition is in order. In other words, in order for a will to override a designated successor holder or beneficiary, the will would have to explicitly say so. Otherwise, it makes no sense to allow two different methods of specifying one's intentions.

Lawyers should take heed and frame wills accordingly.

I think designations in a will and designations on the accounts can be all honoured, as long as there isn't a contradiction.

Interesting stuff.
I can see why the judge ruled that the will superceded the designation in the RRIF.
I would expect that the criteria of "expressly" "either generally or specifically" would normally mean a specific ("express") reference to RRIF(s) held by the deceased, and that "generally' would mean any RRIFs without naming the account, whereas "specifically" would name the account.

The judge, on the other hand, sees "expressly" as referring to the inclusivity of "ALL wills and testamentary dispositions..." Perhaps there is some special legal meaning for "expressly", or perhaps the judge just took the strong language as meaning to cover anything and everything, which would be understandable.

What is not ultimately clear, however, is whether the deceased understood that this would mean that the designation he'd made in his RRIF would be invalidated, whether the lawyer drew it to his attention, whether he'd asked the lawyer to make this provision, whether the lawyer was using a boiler-plate, or whether the deceased had even thought about this implication.

It seems to me that if the will was meant to apply to the RRIF, and both the testator and the lawyer knew this, then it would only have made sense and have been very prudent for the lawyer to have made specific "express" reference to it. I think it's fairly obvious that there would be a likelihood of confusion otherwise. They need only have added one simple clause.

I think he didn't have a very good lawyer! However, the lawyer served his profession well by creating more legal work that had to be paid for by people who did not create the problem.