Named Beneficiary Assets and Probate Fees in British Columbia

Many families hold RRSPs, RRIFs, TFSAs or life insurance with a named beneficiary. A common question is whether those amounts count toward the value of the estate when probate fees are worked out in British Columbia.

The general idea is simple, but the details depend on the asset and on whether the designation actually works. This article explains the rule and its exceptions. A lawyer or accountant can confirm how it applies to your family.

This article covers the law of British Columbia.

The basic rule

The probate fee is based on property that passes to the personal representative. Assets that pass directly to someone else at death, for example by right of survivorship or a valid beneficiary designation, are outside that definition. Each asset should be checked against the definition.

So a plan or policy that validly names a living beneficiary generally does not add to the fee base. That is why the exact wording and status of each designation matters.

How designations work

Under the Wills, Estates and Succession Act, a participant in a benefit plan may designate another person to whom the benefit is payable as a designated beneficiary. Part 5 of that Act does not apply to a contract of insurance governed by Part 3 or 4 of the Insurance Act.

That means insurance designations follow a different set of rules from other plan designations. Which rules govern a particular RRSP, RRIF, TFSA or policy depends on the contract, so check the paperwork and ask the plan administrator or insurer.

When a designation does not help

For a designation under Part 5 of the Wills, Estates and Succession Act, the designation cannot be changed after payments start unless the plan terms permit it. That Part does not apply to a contract of insurance governed by Part 3 or 4 of the Insurance Act. If a designation is invalid, the named beneficiary has died, or the estate is named, the benefit may be payable to the estate and so form part of the fee base.

• Check that each named person is still living.
• Check whether the estate or a contingent beneficiary is named.
• Confirm the designation is on file with the plan or insurer.
• Ask the administrator how the account will be paid out.

Tax is a separate question

Avoiding the probate fee does not mean avoiding income tax. Property is generally treated as disposed of just before death at fair market value, any gain is reported on the final return, and the legal representative must file the final T1 return. RRSP amounts are reported as income on the final return, and RRIF amounts are reported under Other income.

Earnings after death on investments that were in a TFSA are reported by the estate on the T3 return. A T3 return may be needed for the estate. Capital gains can be deferred when property is transferred to a surviving spouse, common-law partner or a qualifying spousal trust, and this is elected on the final return. An accountant can explain how this applies, including due dates.

What to do next

• List every RRSP, RRIF, TFSA and insurance policy and who is named on each.
• Request written confirmation of the designation from each plan or insurer.
• Flag any asset where the beneficiary has died or the estate is named.
• Include only assets that pass to the personal representative when estimating the fee.
• If you find an asset after the grant, disclose it to the court and pay any extra fee.
• Speak to a lawyer and an accountant about the final return and any T3 return.

Frequently asked questions