Worksheet: Naming beneficiaries

Download this worksheet to help you walk clients through estate planning and achieve better outcomes.

Many Canadians don’t put a lot of thought into naming their beneficiaries. They assume the rules are straightforward, and that their assets will pass to heirs with a minimum of hassle.

This is a very dangerous assumption

Potential problems

• If your beneficiary designations conflict with your will, the resulting mess will usually need to be resolved in court. This can be costly and time-consuming.
• Recent changes to estate laws in certain provinces can make beneficiary designations in older wills obsolete.
• Clerical errors in beneficiary designations could cause assets to pass through the estate, rather than directly to heirs, costing additional probate fees and delays.
• Many people assume a divorce or separation revokes prior designations. But that’s not always the case; it depends on the province.
• Taxes owing on assets outside the estate (example: an RRSP) may have to be paid by assets inside the estate, potentially creating unequal tax burdens for your heirs.

Dealing with family conflict

• When beneficiary designations are made incorrectly or ambiguously, family conflict often results.
• Many people assume their families will be able to settle asset distributions amicably and fairly. In practice, this often isn’t the case.
• Unexpected surprises in the will can cause deep resentment between family members.
• Such resentment can lead to legal challenges as heirs attempt to get “what’s owed to them.”

Possible solutions

• Review relevant statutes and laws in your province to see if recent changes have implications on the way your beneficiary designations will be handled.
• Ensure you change beneficiary designations after a divorce or separation.
• If you move accounts from one institution to another, double-check with brokerages and banks to ensure beneficiary designations are correct after the transfer.
• Name contingent beneficiaries in case your primary beneficiaries die before you do.
• Communicate fully with heirs (your spouse, your children, your family, your business partner(s)) to let them know your intentions.
• Pay attention to the tax implications of your beneficiary designations. Seek professional tax advice to ensure heirs share the burden fairly.