You’ve worked hard to build your savings in your TFSA and RRSP. You’ve likely even taken the important step of creating a will. You might feel your estate plan is complete. But what if a simple, often-overlooked form you filled out years ago could undo your careful planning?
As a financial advisor, I often see well-intentioned plans complicated by outdated or inconsistent beneficiary designations. These designations on registered accounts like TFSAs and RRSPs are powerful instructions that operate independently of your will. Getting them right is one of the simplest ways to ensure a smooth, efficient transfer of your wealth.
Why a Simple Form Trumps a Legal Will
Many Canadians believe their will is the final word on their estate. However, for your registered investments, the beneficiary form you sign with your financial institution almost always takes precedence. This means an old form naming an ex-spouse or a relative you’ve lost touch with could override the wishes you’ve so carefully outlined in your will. The result for your family? Unnecessary delays, costly legal fees, and potential family conflict during an already difficult time.
The Subtle Difference That Can Save Thousands
A key area where expertise matters is in understanding the nuanced strategies available. For instance, did you know there’s a significant difference between naming your spouse as a beneficiary versus a successor annuitant on a TFSA?
While both ensure your spouse receives the assets, the latter allows the account to transfer seamlessly and intact, preserving its tax-sheltered status and potentially doubling their available account room. This isn’t a matter of right or wrong; it’s a matter of choosing the most efficient strategy for your family’s specific situation. Similar strategic choices exist for RRIFs and other accounts, impacting tax efficiency and income flow for your spouse.
Are You Missing a Crucial Backup Plan?
Life changes, and so should your plan. A primary beneficiary may predecease you, or your relationships may evolve. Without a named contingent (backup) beneficiary, those assets could be forced into your estate. This subjects them to the probate process, which can add months of delay and thousands of dollars in avoidable fees. A simple review can ensure your assets have a clear path to your intended heirs, bypassing probate and getting to your family faster.
Your Next Step: Awareness, Then Action
The goal of this article isn’t to provide a one-size-fits-all solution—strategies must be personalized. Instead, it’s to highlight a common blind spot that can quietly undermine your financial legacy.
The most important step is to become aware of what your current designations say and to consider whether they still align with your overall goals. Spending a few minutes with your advisor to review them can provide clarity and confidence, ensuring your instructions are harmonious, tax-efficient, and designed to give your executor and your family the gift of simplicity.
On our website, you can find more articles about estate planning and other financial topics. If you have questions about this article or would like a conversation about how these ideas apply to your unique situation, call us at 403-290-0940.
About the Author
Robert Hurdman is a seasoned Canadian financial advisor holding both the Certified Financial Planner® (CFP) and Chartered Investment Manager® (CIM) designations. He is dedicated to creating personalized financial plans for families and individuals, so that they can enjoy retirement without financial worries. He uses a tailored approach to craft comprehensive strategies spanning investments, taxes, and estate planning. Robert's commitment extends to ongoing guidance, collaborating with experts, and fostering trust-based, long-term relationships that prioritize clients' financial well-being.
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The comments contained herein are a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. This blog was written, designed and produced by Robert Hurdman, for the benefit of Robert Hurdman, Certified Financial Planner with Quiet Wealth, a registered trade name with Investia Financial Services Inc., and does not necessarily reflect the opinion of Investia Financial Services Inc. The information contained in this blog comes from sources we believe reliable, but we cannot guarantee its accuracy or reliability. The opinions expressed are based on an analysis and interpretation dating from the date of publication and are subject to change without notice. Furthermore, they do not constitute an offer or solicitation to buy or sell any securities. Mutual Funds are offered through Investia Financial Services Inc. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently, and past performance may not be repeated.