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Is signed documentation required when opening a TFSA?
January 25, 2023
12:19 pm
rodeworthy
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My spouse and I have identical value TFSAs. In December, 2022 we withdrew all TFSA funds from existing accounts as the initial part of the “December Maneuver”.

In January, 2023 we undertook to place a 1-year and a 2-year GIC for each account at an Ontario CU. The GIC rates were great but this particular CU has a low HISA rate so I looked elsewhere to finish topping off the accounts with the remaining cash portion.

We were close to exceeding CDIC rates in our non-registered Wealth One Bank account so I decided to open TFSAs there to satisfy two situations. Moving the cash from HISA to TFSA created additional CDIC coverage and reduced our exposure there. If we decide to open additional GICs, Wealth One GIC rates are currently good too.

Those deposits brought us back up to our TFSA contribution limit.

The two experiences to create these accounts could not have been more different.

Understandably, this was a busy time for FI’s. The CU was swamped but I was impressed with the rep who took charge of our applications. It was necessary for us to provide several signatures to the applications for the accounts (contracts) and to sign additional documents to declare a Successor Holder for each of them. These were sent, signed and returned via Canada Post. That ate up a few days. Good communication was maintained, and we eventually received signed contracts for each GIC providing proof of the transactions. The GICs beginning dates were back-dated to Jan 5 despite the mailing delays.

I am very satisfied with the process and results of this transaction.

I began the process of opening TFSA accounts at Wealth One Bank with a telephone call. The CSR took the information provided to open two TFSA accounts and instructions to move identical amounts from our WOB Joint HISA account to fund each of the new TFSAs. I also provided information with respect to a Successor Holder for each account. The rep advised it was all set up. No need for additional information or verification. My spouse was not involved with the transaction at all. Contract numbers were provided. I asked for a written confirmation of the Successor Holder status and the rep sent a detailed email to each of us including contract information and that we were each declared ‘Successor’ for the other’s contract.

To be fair, WOB has our SIN numbers, date of birth and other pertinent information on file. Is that all that is required? Any contract I have been involved with requires an agreement between at least two parties and signatures are used to acknowledge acceptance of the terms. No signatures required here – and no paperwork. Our online account information does show these accounts exist with appropriate contract numbers and other data. There is no information pertaining to Successor Holders. The cash transfers did take place as directed. All account balances are correct. But no signed documentation?

I would be interested to know if other forum members who have TFSA at WOB had a similar experience. I know that Bill recently indicated they have TFSA contracts there. How does this information get transmitted to CRA without any acknowledgement from the taxpayer? I am not saying this is wrong. But I am uncomfortable with the outcome. There is a place for full documentation whether mailed or available for secure download. Email is not secure.

Is there a problem here or am I over-reacting?

January 25, 2023
2:38 pm
Loonie
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I don't have a TFSA at WOB, but I have two thoughts.
First, the CU probably required substantial paper work in part because of all the apper work involved in being a new member.
Second, I would be concerned if there were no signed Successor Holder Beneficiary form. It may be that WOB plans to be very forthcoming in the event of death, but I don't think it would stand up if it had to go to court.
Since you have already set this up, my suggestion would be to download a beneficiary form from somewhere else or possibly CRA if they have one, or create your own, fill it out, sign it, and mail it in, ask kthem to keep it but know that they may not be set up for paper filing sf-surprised. Make another original for yourselves to keep in case it is needed.

Point of info: I once had an account at TD with POA assigned to spouse. Spouse used the POA when I was out of the country as I expected. Then we didn't use the POA for a few years. Next time i inquired at TD, they said it didn't exist! and nothing could persuade them that it had existed and they had somehow gotten rid of it. Based on this and other experiences, I have come to distrust banks when it comes to documents that matter to me.

January 25, 2023
5:28 pm
Bill
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At some point I did have Wealth One email me their form to name spouse as successor holder, which they did, but I didn't complete it as I realized I had included in our Wills provisions naming each other as successor holder of any of our TFSAs when we dies. That way wherever we have TFSAs we don't have to do anything.

Gov't site re TFSAs says "In provinces or territories that recognize a TFSA beneficiary designation, the survivor can be designated as a successor holder in the TFSA contract or in the deceased holder's will."

January 25, 2023
8:27 pm
Norman1
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Loonie said

Second, I would be concerned if there were no signed Successor Holder Beneficiary form. It may be that WOB plans to be very forthcoming in the event of death, but I don't think it would stand up if it had to go to court.

One is rightly concerned as WealthOne Bank can't overrule provincial probate laws.

For example, British Columbia's Wills, Estates and Succession Act subsection 85 (2) requires such beneficiary designations to be in writing and signed:

85 (2) A designation, alteration or revocation under this section

(a) is only effective if the designation, alteration or revocation

(i) is in writing,

(ii) is not altering or revoking a previous designation that is irrevocable under section 87, and

(iii) is signed by the person making it, or by another person in the presence of the person making it and by his or her direction,

and the signature may be in the name of the person making it or the person signing by his or her direction,

(b) may be made in a will, but if it is,

(i) the designation is only effective if it relates expressly to a benefit plan, either generally or specifically, and

(ii) Division 3 [Designated Beneficiaries in a Will] of this Part applies to the designation, and

What's one going to present in court should one of the residue beneficiaries claim that there is no designation and that the TFSA should be added to the estate?

January 27, 2023
6:58 pm
rodeworthy
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Thank you Loonie, Bill and Norman1 for your comments on my dilemma with lack of documentation for Successor Holders for the TFSAs we established at WOBC. You have confirmed my suspicions that this could be a problem. I got to work to get this resolved.

Before I get into that, a couple of observations:

Loonie, we already had a savings account at the CU where we opened our TFSAs. In fact, it is the same CU that you alerted the forum to in July, 2021 that had a decent (for the time) 18-mo. GIC rate of 2% for a 200K deposit. I took advantage of that and that GIC matured in December 2022. We used that money to purchase the TFSAs in January, 2023. Thanks again for posting that information.

Bill, I am intrigued about the solution to a problem like this can be resolved within one’s will. I had not considered that before. I checked our wills and there is nothing specific about that. I presume a codicil could be drafted to cover that situation. I will be looking into it. Thanks for sharing that info.

Norman1, your in-depth analysis, as always, stirred me to do some digging too and the following is what I came up with. Thanks for your input.

Excerpts from The Government of Canada site dealing with The Tax-Free Savings Account state the following [emphasis is mine]:

Successor holder

In provinces or territories that recognize a TFSA beneficiary designation, the survivor can be designated as a successor holder in the TFSA contract or in the deceased holder's will.

A survivor can be named in the deceased holder's will as a successor holder to a TFSA if the terms of the will state that the successor holder receives all of the holder's rights including the unconditional right to revoke any beneficiary designation, or similar direction imposed by the deceased holder under the arrangement or relating to property held in connection with the arrangement.

If named as the successor holder, the survivor will become the new holder of the TFSA immediately upon the death of the original holder.

This rule applies for all three types of TFSA: deposit, annuity contract, and trust arrangement.

The deceased holder is not considered to have received an amount from the TFSA at the time of death if the holder named their survivor as the successor holder of the TFSA. In this situation, the TFSA continues to exist and the successor holder assumes ownership of the TFSA contract and all of its contents.

The TFSA continues to exist and both its value, at the date of the original holder’s death, and any income earned after that date continue to be sheltered from tax under the new successor holder.

The issuer will notify us of this change in ownership.

So, even under these circumstances there is a reliance on the TFSA issuer to understand the status of the TFSA to put into action the ‘change in ownership’. If the issuer does not recognize a successor holder status it stands to reason they would not take this action. Possibly this is resolved at the issuer level or later with the presentation of the will. I am not sure what obligation a FI would have in this circumstance.

To avoid any of this going the wrong way it seems imperative for the issuer to provide documents that are signed by both issuer and holder and will verify the beneficiaries of the holder’s TFSA including the Successor Holder, if any.

I went searching for a beneficiary form on the WOBC site but instead came up with the Terms and Conditions that spell out the obligations with respect to beneficiaries including a Successor Holder. Again the emphasis within the text is mine:

Wealth One Bank
Terms and Conditions
Tax Free Savings Accounts (TFSA)
...

9. Designation of Beneficiary. Where permitted under applicable law, You may designate a Successor Holder or beneficiary (the “Beneficiary”) to receive the Plan Assets after Your death.

You may only make, change or revoke a designation by providing Us with written notice signed by You in a form acceptable to Us or prescribed by Us or by valid will under applicable law. In order to be effective, any designation or change or revocation notice must be delivered to Us before any payment as a result of Your death has been made hereunder. Any designation, amended designation or revoked designation will be valid on the day following its receipt by Us or, in the case of a valid will, as of the day of execution of the will. We will not accept designations that are irrevocable.

So, there you have it. A written and signed designation must be made to establish a Successor Holder according to WOBC’s own Terms and Conditions.

I now had enough information to pursue this directly with WOBC. I wrote to them via their help email address and explained the situation. Shortly I had a reply, apologizing for the error and a copy of WOBC’s: “Beneficiary Designation for Registered and Non Registered Plan”.

We have completed and signed two copies of these forms which will be mailed Monday. WOBC will need to fill in the portions of the forms they are responsible for and sign the document. I have asked to have copies of that completed document returned to us for record keeping purposes.

For point of clarity there is only a Successor Holder designated in our TFSAs. There are no other beneficiaries named.

January 27, 2023
7:07 pm
Bill
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Regarding the Will solution I prepared our Wills and re the TFSA I used exactly the wording you cite from the gov't site in the Wills, i.e. "the successor holder receives all of the holder's rights including the unconditional right to revoke any beneficiary designation, or similar direction imposed by the deceased holder under the arrangement or relating to property held in connection with the arrangement." Fyi.

January 27, 2023
7:33 pm
rodeworthy
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Looks like you have it covered, Bill. I am definitely going to look into adding this provision to our wills. I still like the issuer documentation as a first-level understanding of the status of beneficiaries. The will provision will make the process indisputable. Thanks again for pointing me in that direction.

January 27, 2023
8:11 pm
Loonie
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I'm glad you found the right solution. Obviously it pays to do your own homework!

January 28, 2023
8:11 pm
Norman1
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Beneficiary designations on the account and in the will do interact. If one has them in both places, one needs to ensure the end result is what is desired.

See previous discussion.

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