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Services During the Covid-19 Pandemic

Please be advised that in response to the threat posed by Covid-19, the offices of RV Law LLP have implemented protocol to keep the physical premises sanitized and to supply our staff with necessary personal protective equipment. For the safety and well being of our staff and the general public, we are providing services by adopting government recommended social distancing efforts and, to this end, we are meeting clients through a combination of telephone, other electronic means and in-person only when necessary.

We are confident in our ability to continue servicing all existing and new client matters during these challenging times and invite you to email or call our firm with any questions or concerns you may have.

Beneficiary Designations

Beneficiary designations allow assets (of a certain class such as RSPs, life insurance proceeds, and other registered investments allowing for beneficiary designation) (hereinafter the “Qualifying Assets”) to pass directly to beneficiaries outside the terms of a Last Will and Testament. Unlike assets which flow through the estate and are accordingly subject to Estate Administration Tax (hereinafter “EAT”), Qualifying Assets are distributed directly to designated beneficiaries upon your death.The simplest manner to designate a beneficiary is to carefully complete the requisite documentation establishing the Qualifying Asset. Care is required lest the Qualifying Asset be acquired without a specific designation of beneficiary being set out which results in the estate benefiting by default. In such case, the Qualifying Asset becomes state property which is then subject to the estate administration process and the corresponding EAT.

The decision to designate the estate as beneficiary can also be intentional and even strategic as opposed to the result of careless completion of documentation. Specifically, naming the estate beneficiary of a Qualifying Asset may be desirable in circumstances where, for example, the Trustee is required to satisfy debts, pay for funeral arrangements and burial and cover the cost of estate administration, including legal and accounting expenses.

Beneficiary designations can also be set out in one’s Last Will and Testament. It is most prudent to ensure that the designation in the Will matches the designation made on the registered instrument establishing the Qualifying Asset. It is wise to consult a lawyer throughout the estate planning process to ensure consistency of one’s will and other essential estate planning instruments.

As a final point, it is important to consider some important differences between certain types of Qualifying Assets from a taxation perspective. Whereas insurance proceeds are passed to designated beneficiaries outside of the estate and therefore not subject to EAT, insurance proceeds are also statutorily protected from any creditor claims. Other Qualifying Assets like RRSPs or RRIFs, however, while shielded from EAT, are subject to income tax unless the designated beneficiary is one’s spouse. In other words, if one’s designated beneficiary is someone other than one’s spouse, the entire value of the RRSP or RRIF will be included in the taxable income for the year of the testator’s death, and the executor will have to satisfy the tax liability out of the estate since the assets have passed outside the estate to the designated beneficiary. Similarly, whereas insurance proceeds are protected from creditor claims, proceeds from other Qualifying Assets paid directly to designated beneficiaries do not enjoy the same protective treatment and may accordingly be traced and looked to by creditors of an estate.


Disclaimer: This article provides general information only and is not intended, nor is it to be relied upon as a substitute to obtaining legal advice.

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