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Successor holder and/or Beneficiary
April 17, 2017
9:04 am
Cranston
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We have talked about who readily accepts POA.

One needs to review what accounts have Successor Holder and/or beneficiary and what the value to your estate could be by having both. Successor Designation will allow spouse to assume TFSA RRSP RRIF funds as TFSA RRSP or RRIF and abviously avoid probate. In the event the spouse dies and there is both Successor holder and benficiary assigned to your registered accounts your beneficiary will avoid probate on those funds although they will have to de-registered and taxed appropriately (RRSP and RRIF) for the deceased last income tax but still avoid probate fees. And yes the decision must be made by the executor to cash all into a no interest account OR allow investments to still accrue interest and the beneficiaries will have to pay income tax on any of the accrued interest collect after the date of death.

And lastly when a spouse dies one should review all Successor holder or beneficiary forms for each account and reassign beneficiaries for those accounts that had Successor holder only to avoid probate and probate fees.

April 17, 2017
1:06 pm
Loonie
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It's important to remember, though, that a spouse successor does not have to cash in the registered plans and can simply transfer them to themselves and carry on as before.

April 17, 2017
9:40 pm
Norman1
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Successor holder designation on a TFSA or beneficiary designation on TFSA/RRSP/RRIF can avoid probate taxes, but not always probate.

If the TFSA, RRSP, or RRIF is sizeable, the financial institution will wait for probate.

In most provinces, a subsequent will can revoke and change the successor/beneficiary on registered accounts. The financial institution will want to make sure that the probated will does not change the successor or beneficiary designated on the accounts themselves.

April 18, 2017
8:52 am
JW
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In our case we have named the Spouse as Successor Holder for TFSA and Successor Annuitant for LIF and RRIFs. In addition named our adult children as Contingent Beneficiaries should the Spouse pre-decease the Account Holder. The Contingent Beneficiaries and their respective shares are consistent with our Will designations. Legal guidance we got is the TFSAs, LIF and RRIFs can move outside Probate. Norman 1 is correct the Financial Institution may hold things up until the Will is Probated but the values of the TFSAs, LIF and RRIFs need not be included in the amount declared for Probate.

August 3, 2017
12:34 pm
Loonie
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I just ran across this statement:

" there is a whole separate issue about insurance companies and banks and the way they interpret the term beneficiary. Under the Canadian insurance act, a beneficiary has a special meaning and money is paid directly to that beneficiary without fanfair upon death but under the Canadian bank act, banks require a public probated copy of a will to honor a beneficiary designation."
https://annuitybrokers.ca/non-resident-canadians/

I have not looked into the Bank Act on this, but perhaps this is the issue we need to be looking at?

August 3, 2017
3:44 pm
AltaRed
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As an executor, I would consider not releasing any RRSP, LIRA, TFSA, etc. funds until I had the Will probated and the Final T1 return done. Partly for reasons given already, e.g. conflict between a subsequent Will and a stale beneficiary form.... But also where a RRSP, LIRA, etc, must be collapsed and income taxes are due. The income taxes must be paid from estate assets, and maybe from the RRSP distributions themselves.

IOW, it depends on size of the RRSP relative to the rest of the estate, the other asseets in the estate, named beneficiaries of the RRSP vs other estate assets, etc.

August 3, 2017
5:35 pm
Norman1
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Loonie said
I just ran across this statement:

" there is a whole separate issue about insurance companies and banks and the way they interpret the term beneficiary. Under the Canadian insurance act, a beneficiary has a special meaning and money is paid directly to that beneficiary without fanfair upon death but under the Canadian bank act, banks require a public probated copy of a will to honor a beneficiary designation."
https://annuitybrokers.ca/non-resident-canadians/

I have not looked into the Bank Act on this, but perhaps this is the issue we need to be looking at?  

Statements are false. I've seen such statements from people in the insurance business who don't know what they are talking about.

I mentioned a case earlier that shows the first statement is false. Ask the ex-wife of the deceased who sued the estate and insurance companies. It held up the life insurance payout for a year. She was awarded $150,000 of the $300,000 proceeds from the deceased's life insurance policies. That included a policy that the deceased had designated his current common-law wife as the beneficiary of.

Banks don't need to wait for a probated will, if they are willing to be liable to the rightful heir should a will be probated later that changes the beneficiary. In fact, a TD Bank branch did just that in the case of Monteiro v. Toronto Dominion Bank mentioned here. No Bank Act violations. Just the ire from and a US$700,000+ payment to the rightful beneficiary.

August 3, 2017
6:22 pm
Top It Up
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Norman1 said

Banks don't need to wait for a probated will, if they are willing to be liable to the rightful heir should a will be probated later that changes the beneficiary.  

My OWN experience as executor of two wills - neither of the 2 banks or the 1 credit union involved would "budge" without probate - NO further discussion, period.

August 3, 2017
8:22 pm
Cranston
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Top It Up said

My OWN experience as executor of two wills - neither of the 2 banks or the 1 credit union involved would "budge" without probate - NO further discussion, period.  

Top It Up
The question is.......what dollar value requires NO probate in you province. And were the funds in the 2 banks and 1 credit union under or over? Ie. BC requires no probate for $25,000 or less.

August 3, 2017
9:25 pm
Norman1
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Top It Up said

My OWN experience as executor of two wills - neither of the 2 banks or the 1 credit union involved would "budge" without probate - NO further discussion, period.  

Those who owe the deceased, including financial institutions, would like to pay what is owed and pay that only once. Paying under the direction of an executor appointed by a probated will gives them that legal discharge, even if the probated will later is found to have issues.

There was a case a few years ago in southwestern Ontario where the children applied for probate of their father's will. A woman showed up at the court hearing and produce a marriage certificate dated subsequent to the execution of the will. Probate was refused.

Unknown to the children, the father had remarried and the woman was their stepmother! sf-surprised That subsequent marriage revoked the will.

August 4, 2017
4:40 am
Top It Up
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Cranston said

The question is.......what dollar value requires NO probate in you province.  

BOTH wills were high-value and were probated in BC.

August 4, 2017
3:52 pm
Cranston
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Top It Up said

BOTH wills were high-value and were probated in BC.  

That makes sense as probate in BC must take place if over $25000. And no doubt they cover themselves just in case if you have money in an account at a different bank or credit union. I assume they do not have the ability to check if you have more $25,000 accumulated elsewhere.

In my Moms case she only had money in, one only credit union and no other assets. Would be interesting if you were an executor to an estate under $25,000 as far as what the bank or credit union would ask for (or demand).

August 4, 2017
8:11 pm
AltaRed
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A former banking executive has said in other forums that it 'depends' on the relationship one has with the particular bank, e.g. the deceased client having known some of the staff, where the beneficiaries and executors are the same, whether there might be creditors, and so on. IOW, it depends on the perceived degree of risk the FI is taking.

August 4, 2017
8:57 pm
Norman1
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I think probate of the will is always required in BC, regardless of the size of the estate. Otherwise, what is releasing the financial institution of its obligations to the deceased? If someone else shows up later with a different will and that was actually probated, the financial institution would have to pay up a second time.

Either the will is probated or, as AltaRed points out, the financial institution has to be willing to take on that risk.

There is little excuse not to probate in BC when the estate is under $25,000. Probate tax is waived when the estate is under $25,000. The regular $200 court filing fee is also waived.

There is a special case in Manitoba with the Manitoba credit unions. Subsection 41(3) of The Credit Unions and Caisses Populaires Act could release a Manitoba credit union in certain cases:

Payment on death

41(3) Where a member of a credit union dies and there is no executor of a will of the deceased member or administrator of the estate of the deceased member, the credit union may, upon receipt of an affidavit or such other proof of death or proof of claim as may be required by the credit union, pay a prescribed amount out of moneys standing to the credit of the deceased member to the person who appears to be entitled to the amount of the deceased member's interest and payment made under this section releases the credit union from any further liability with respect to the moneys so paid.

But, the prescribed limit in Regulation 316/87 is just $5,000:

Payment of prescribed amount on death of a member

7 For the purposes of subsection 41(3) of the Act, the maximum amount a credit union may pay out of moneys standing to the credit of a deceased member is $5,000.

August 5, 2017
4:54 am
Top It Up
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AltaRed said
A former banking executive has said in other forums that it 'depends' on the relationship one has with the particular bank, e.g. the deceased client having known some of the staff, where the beneficiaries and executors are the same, whether there might be creditors, and so on. IOW, it depends on the perceived degree of risk the FI is taking.  

YEAH, I'm not sure that holds much value anymore. With the stronger presence of online banking and internet credit unions, there's hardly any need to enter a storefront financial institution. PLUS, for the last couple of decades or so, FIs have been closing the smaller branches and consolidating them into "super" centres leading to less interaction and personal face time.

August 5, 2017
12:05 pm
AltaRed
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I've never objected to the concept of probate for each and every estate. People do a lot of really crazy things with respect to impulsive creation of sloppy and incomplete wills, or no wills, or changing stuff whenever they get pissed at someone, unexpected creditors, lurking ulterior motives by a family member or beneficiary, etc, etc. I've heard a wide range of disappointing behaviour from fellow boomers who have had to live it with estates of parents/siblings, etc.

August 7, 2017
10:22 am
JenE
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After reading the above posts I realized I know nothing about probate. I went onto various web sites, including Ont. gov., looking for answers, but am still uncertain about the facts. One gov. site declares that the whole estate is subject to probate but it appears that one or more of the forum members feel that TFSA/RIF, if designated to a specific beneficiary, are not included in probate. Maybe I'm interpreting incorrectly. Can anyone suggest where to look for probate information? Thanks in advancesf-laugh

August 7, 2017
12:55 pm
Loonie
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Ontario government says this in FAQ:

"Are Registered Pension Plans (RPPs), Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs) and Tax Free Savings Accounts (TFSAs) subject to estate administration tax?

Yes, RPPs, RRSPs, RRIFs and TFSAs are included in the value of the estate of the deceased for purposes of calculating estate administration tax. However, RPPs, RRSPs, RRIFs and TFSAs with a beneficiary designation or beneficiary declaration which pass directly to that beneficiary and not through the estate are not subject to estate administration tax."

http://www.fin.gov.on.ca/en/ta.....q.html#Q21

Perhaps the difficulty is in distinguishing what is subject to probate and what is subject to the tax that accompanies it (Estate Adminnistration Tax).

Probate refers to the "proving" of a will, i.e. to establishing its validity according to law. So, in that sense, the registered plans would be included. However, with the proper beneficiary designations, these plans will not be subject to the tax. As long as there is a spouse, properly designated, there is no problem.

I am a little less clear about what happens on the death of the second spouse. it would appear that the RSP/RIFs are then fully taxed, both as Estate Adm (as they must be liquidated at this point) and also as Income Tax. In the absence of a surviving spouse, the TFSA, unlike the RSP/RIF, can be passed to any designated beneficiary without triggering either tax, but the income on it from date of death is subject to income tax until such time as the recipient can put it in their own TFSA, if at all. I think, but am not sure, that there is still no estate tax on it. However, for a non-spouse who has filled up their TFSA from other sources, this money will eventually become part of their estate (if not spent), and that money will then be subject to Estate Admin Tax but will always avoid income tax on the principal that was inherited. I'm sure someone will correct me if I'm wrong about this.

I am not a lawyer.

August 7, 2017
4:00 pm
Bill
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As far as I know if a TFSA account has designated either a successor holder (spouse, common law partner) or a beneficiary (anyone) there will be no probate fees/estate admin tax calculated on the value on death. If a TFSA has no designation, i.e. it's distributed via will/estate, there will be related probate fees.

If the surviving spouse subsequently gets another spouse or clp I suppose that new partner could then be added as successor holder or beneficiary.

As far as I know things are different in Quebec.

August 7, 2017
5:20 pm
JenE
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Thanks Loonie and Bill.
I've come up with an idea for an elderly friend of mine (honest!), who wants to leave her home jointly to her two children who live with her. She doesn't have any savings but if she gets a line of credit on her home to buy TFSAs, names her children as beneficiaries, then she should pay less Estate Admin Tax as the encumbrance will be deducted from the value of the estate? Is this correct, and legal?

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