Our blog commonly talks about how fundamental your will is to your estate plan. In your will, you carefully document which assets go to whom, who will act as your trustee, who will act as a guardian for your children, and much more. But clearly stating in your will that your RRSPs should go to your children and your life insurance to your second wife won’t actually guarantee that if the beneficiary listed on these assets says differently.
What Are Beneficiaries? Those who are familiar with our articles will know that a beneficiary is an heir to an asset. Usually we mean that in the sense of a will. When you write your will, you specify that your artwork will be left to your daughter, and your antiques to your son, and the piano to your second cousin. But beneficiaries aren’t just listed in your will. When you create your tax free savings account, an RRSP, your life insurance, etc, you’re often asked who the beneficiary of the account is. The common choice is a partner or spouse, which makes a lot of sense. However, as life goes on and dynamics change, many Canadians forget about these named beneficiaries entirely. They update their will as they divorce, have grandchildren, and retire, and figure that’s good enough.
It’s Not Good Enough. Many Canadians believe that their last will and testament should be just that — the final word on how assets should be distributed. But make no mistake — if you’ve listed a beneficiary outside of your will, that person will receive the money, no matter what the will says. This is also true for joint possessions. Joint bank accounts and jointly owned property will automatically transfer to the survivor.
Accounts Without a Beneficiary Go to Probate. Probate is a common subject here at MacMillan, so you can catch up on the basics relatively quickly. The Cole’s Notes of probate are: It’s the court process of finding your will legally valid. There are costs associated with probate, and your will is made a public document. So if circumstance has led you to make an atypical decisions about how to distribute assets (for example, leaving a much larger inheritance to one of your children), crafting your estate so that much of that child’s inheritance goes directly to them through trusts, naming them the beneficiary of the account, or joint ownership may prevent family squabbles after you’re gone.
While most Canadians remember to stay on top of their estate plan updates, it’s easy to forget about that bank account or life insurance you set up 30 years ago. Staying on top of which accounts have beneficiaries and who those beneficiaries are will save everyone a lot of heartache in the long run. The expert estate planners at MacMillan have been helping Canadians create personalize estate plans for over 20 years. It’s our job to know about all the little details that may get overlooked — like who’s the listed beneficiary on the TFSA your parents set up for you when you were 18. Get started today on your professionally crafted estate plan with a free consultation with our friendly team. Call us today.