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$100,000 CDIC coverage, successor, registered accounts.
October 26, 2023
5:21 pm
friskyib
British Columbia
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We have, at PT, a TFSA account each, my wife and i are successors to each others. So I was astonished at how poorly I managed the accounts in regards to estate planning.

If one of us dies then the remaining spouse will have over $100,000 at PT.

I have done a 5 year plan to get it into shape.

But I did call PT and asked what happens in regards to death and CDIC coverage. I assumed the two accounts would be merged. BUT according to the person I spoke to that the account would have the name only changed but would remain the same...assuming same contract number. So the successor would have over $1000,000 under 2 contract numbers.

My question is....... does each contract of a TFSA, in this case, have $100,000 CDIC coverage?

Peoples Bank does not have any registered accounts.

October 26, 2023
5:44 pm
Bill
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You, in your name, have $100K total TFSA CDIC coverage at PT, doesn't matter how many contracts.

If you're worried about being over the CDIC limit you can just withdraw any excess from TFSA and put it back in a TFSA elsewhere next year, no?

October 26, 2023
6:32 pm
friskyib
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You, in your name, have $100K total TFSA CDIC coverage at PT, doesn't matter how many contracts.

I think the same.

If you're worried about being over the CDIC limit you can just withdraw any excess from TFSA and put it back in a TFSA elsewhere next year, no? 

I am somewhat concerned. Yes, mature and move out ... no transfer fee as well ..... I have a plan in place and will take 3 years to complete.
Using Oaken as the “move to”. Not my favourite and may need to find another FI. Not too concerned, as how often does CDIC ever kick in as often the troubled FI merges into a more stable environment. The guy at PT led me to believe that, that was the fix for CDIC coverage ... or is that just to keep the deposit? I am going to do what’s logical and safe for me vs a theory.

I was just curios as to how a successor would stand CDIC wise if it caused them to go over $100,000 at one FI.

I do believe our CDIC coverage needs an upgrade.

October 26, 2023
10:14 pm
HermanH
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I also called PT/PB and was told that I, as a joint GIC survivor, could redeem GIC early and collect all accrued interest without penalty. For something this important, I wanted written confirmation. So, I wrote them an e-mail and received a return call (even though I requested e-mail reply.) The caller told me that there was a clarification and that the GIC would not be allowed early redemption. At least I know, now.

October 27, 2023
9:17 am
Loonie
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My impression, after asking this question at various FIs, is that official policy is that they won't redeem early for any reason, but they also typically tell me that exceptions are normally made.

My conclusion is that the policy is designed to protect the FI in case they can't afford to redeem, but usually they can.

Nonetheless, to be on the safe side, I wouldn't hold both single and joint GICs totalling over insured limit. I don't buy single GICs any more, so it's not an issue for me, but might be for you.

October 27, 2023
9:45 am
friskyib
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HermanH said
I also called PT/PB and was told that I, as a joint GIC survivor, could redeem GIC early and collect all accrued interest without penalty. For something this important, I wanted written confirmation. So, I wrote them an e-mail and received a return call (even though I requested e-mail reply.) The caller told me that there was a clarification and that the GIC would not be allowed early redemption. At least I know, now.  

That sounds like you are talking about non registered. That’s good to know and I agree an email is best way to go vs a phone call. Is a good idea to have a GIC ladder set up, so if money is needed, it’s not years away.

Oaken recently collapsed all my RRIFs to move to their other bank to solve being over $100,000 in the event of death. Thanks, Oaken!

On the other hand my wife is handling a $1,000,000 estate. We were told years ago, that upon death all GICs would collapse. They did NOT and only assume were left as is to remain in various GICs all under $100,000.

Now the issue is..,,,beneficiaries to pay income taxes on interest accrued after date of death. We will take one step at a time.

October 27, 2023
10:23 am
HermanH
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Loonie said
My impression, after asking this question at various FIs, is that official policy is that they won't redeem early for any reason, but they also typically tell me that exceptions are normally made.

My conclusion is that the policy is designed to protect the FI in case they can't afford to redeem, but usually they can.

I'll be sure to ask, but they sounded pretty adamant. Also, some seemed open to early redemption, but only at the cost of sacrificing the accrued interest; not something I am willing to do.

October 27, 2023
10:47 am
AltaRed
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Ultimately, there is no legitimate reason for an FI to 'early redeem' a joint GIC if at least one owner is still alive.

The exception might be where a court order tells them to do so if it has been determined that the beneficiary/beneficiaries of the funds as provided for in the Will are not the surviving owner(s) of the joint GIC. This is what I referred to earlier as the surviving owner(s) not having beneficial interest, e.g. as an adult child of the deceased who was a joint owner for purposes of convenience....as compared to acting in the capacity of a POA. It seems like some people do these "joint for convenience" exercises without recognizing they could conflict with the provisions of the Will.

October 27, 2023
10:54 am
HermanH
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The bank cannot know how much each party contributed to the GIC purchase. They may grant early redemption if they believe that the funds are predominantly owned by the deceased. Difficulty to prove ownership ratio, but one can try/ask.

October 27, 2023
11:16 am
AltaRed
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I agree the FI has no way to make any determination on allocation of ownership absent a signed document on file that allocates ownership much like a 'tenants in common' land title would versus joint undivided land title. The standard (default) form of joint ownership is JTWROS and it is up to the owners of that joint asset to manage (and document) it properly.

October 27, 2023
12:06 pm
Loonie
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The FI would know whose money it originally was if the funds had come from an account at that FI and had been there for a while - not unusual in the case of elders..

I think AltaRed's argument about wills would be applicable only in rare instances. when you buy a GIC "joint with right of survivorship", it means the survivor will be the owner. It doesn't mean anything else. It's fair to assume that if that wasn't what they wanted, what they wanted, they wouldn't have signed up. "Convenience" isn't much of an excuse, and I can't think of any other instance where it would be accepted as an argument to negate what one had done.

That said, in my experience, FIs often push for people to set up these accounts of convenience because they don't seem to want to deal with POAs. It seems to be almost automatic that if you say "POA", they will say "joint account". And if you insist on POA, they will make it difficult for the attorney to do their job. So far, I've run into variations on this theme at one big bank and 2 CUs.

October 27, 2023
12:33 pm
AltaRed
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I will leave it to readers to form their own opinions on case law regarding this matter. A couple of articles on this matter:

https://www.advisor.ca/tax/estate-planning/joint-accounts-and-survivorship-rights/

https://www.manulifeim.com/retail/ca/en/viewpoints/estate-planning/joint-tenants-with-rights-of-survivorship-an-appropriate-strategy

FWIW, I have read, and also know of a few cases, where bun fights took place in court on estates on just these matters. It is almost never an issue with JTWROS accounts between spouses (our usual assumption on sites such as this one), unless it is a second marriage, blended family, etc. The problem also typically arises between parent and adult child where the surviving 'adult child' makes an exclusive claim on the JTWROS funds....potentially before the body is even cold.

Best advice: Be clear on intent.

October 27, 2023
6:00 pm
HermanH
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Loonie said
That said, in my experience, FIs often push for people to set up these accounts of convenience because they don't seem to want to deal with POAs. It seems to be almost automatic that if you say "POA", they will say "joint account". And if you insist on POA, they will make it difficult for the attorney to do their job. So far, I've run into variations on this theme at one big bank and 2 CUs.  

PoA was the primary reason behind my decision to just buy things jointly. I also had PoA, but did not want to deal with the rigamarole. Also, since PoA ends at death, I did not see much point.

October 28, 2023
3:29 pm
RetirEd
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Am I right in this - I've never had a joint account - but aren't joint and individual accounts/GICs in separate CDIC classes? If one partner, say the wife, had a personal account with $100K CDIC coverage, and then they had a joint account with $100K CDIC coverage... the joint account could be made to roll over on her death to her personal account. Which could then be moved to another institution, no? Perhaps even a Peoples Bank product, since it could no longer be tax-free after death?

Or in any case, couldn't the deceased spouse's over-CDIC assets be moved to non-registered PT account, or other?

Just trying to get my head around it... depends on instructions for death of the joint partner?

RetirEd

October 28, 2023
6:14 pm
friskyib
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Am I right in this - I've never had a joint account - but aren't joint and individual accounts/GICs in separate CDIC classes?

Joint is for non registered funds only. And yes, each one of these have separate CDIC coverage.
Non registered - joint
Non registered - individual
Registered RRIF - passes on to named successor of estate
Registered RRSP - passes on to named successor of estate
Registered TFSA - passes on to named successor of estate

1. If one partner, say the wife, had a personal account with $100K CDIC coverage, and then they had a joint account with $100K CDIC coverage... the joint account could be made to roll over on her death to her personal account (you mean individual account?). 2. Which could then be moved to another institution, no?

Talking about non registered....
1. I guess, yes. But then the survivor could have $200,000 and is not CDIC covered.
2. Sure, if $100,00 of the $200,000 was cash. Is a problem if is $200,000 in not yet matured GICs.

Perhaps even a Peoples Bank product, since it could no longer be tax-free after death?

Yup for non registered only. And do keep in mind that People's Bank does not mirror People’s Trust products and only offers non registered HISA or GICs.

My issue is with TFSAs.

Or in any case, couldn't the deceased spouse's over-CDIC assets be moved to non-registered PT account, or other?

If the over CDIC assets are non registered yes.. but if GICs, you could ask them to do you a favour.

Just trying to get my head around it... depends on instructions for death of the joint partner?  

Joint partner is joint...no probate or will involvement...partner receives funds.
Individual account .....probate is required (over $25,000) and instructions must be followed as per will as to who is/are beneficiaries .... partner may have no entitlement.

Estate planning is a must for partners, husbands and wives and etc. for all registered and non registered accounts. For a married couple the obvious is “joint and successor set up” keeping in mind how your funds are insured ....CDIC or Credit Union coverage as per province. And more than ever planning for CDIC insured funds if both have investments at the same FI. While I have not pursued, some registered accounts can have beneficiaries instead of a successor. And also keep in mind that a couple would want to avoid heavy taxation as based on your “set up” or no “set up” or a bad “set up” as registered funds may have to be fully collapsed and withdrawn and the deceased spouses last income tax will huge.

EO&E on the above.

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