RRSP Beneficiary Rules in Ontario: Who Can Be Named and Why It Matters

An RRSP is often one of the largest assets a person owns, and who receives it is usually decided by a form rather than by the will. That surprises many families, and it is a common source of disagreements after a death.

This article covers who can be named, whether a designation works outside a will, what happens if nothing is named, and what can undo or reduce a named person's entitlement. The plan contract and your own facts always matter, so confirm specifics with the issuer and a lawyer.

Designations can sit outside your will

Under section 51 of the Succession Law Reform Act, a participant in a plan, such as an RRSP, RRIF or pension, may name a person to receive the benefit payable on death. The designation can be made by signed instrument or by will, and revoked the same way.

That means a signed designation held by the issuer is a valid way to direct the plan without going through the will. A designation in a will, however, takes effect only if it relates expressly to a plan.

Who can be named, and who handles it

The statute speaks of naming a person to receive the benefit. Whether a particular issuer allows more than one person, a trust, or a split of percentages is a matter of that plan's terms, so ask the issuer.

If you lose capacity, a person acting under your continuing power of attorney for property is limited. An attorney or guardian of property may make a designation when a plan is converted, renewed, replaced or transferred. An attorney under a continuing power of attorney for property cannot make a will for you. Beyond those plan events, whether an attorney may change a designation depends on the documents and the facts, so it is worth confirming with a lawyer.

• Check the plan's own forms for the types of recipient allowed.
• Name people clearly, with full legal names.
• If a child may receive money, ask the issuer and a lawyer how the rules for minors would apply to your plan. For life insurance left to a child, an adult may be named as trustee.

Changing, replacing and conflicting designations

A later designation revokes an earlier one to the extent they are inconsistent. The plan administrator is discharged by paying the person named in the latest designation made under the plan's terms. After a separation or a new relationship, it is worth checking that the name on file still reflects your wishes.

Be careful with assumptions about divorce. The rule that revokes gifts to a former spouse in a will after a divorce or annulment is about wills. It does not tell you what happens to a plan form that still names a former spouse, so update the form itself.

What if no one is named?

If no designation applies, the money cannot go to a named person, and what happens depends on the plan terms. Often the estate becomes involved. The estate trustee holds the deceased's property for the people entitled, subject to the deceased's debts. Those people are determined by the will or, with no will, by the intestacy rules.

With no will, a spouse with no issue takes everything. With issue, the spouse takes the preferential share and then a portion of the rest, and the remainder goes equally among the issue. The preferential share is $350,000 for deaths on or after March 1, 2021. A common-law spouse does not inherit under the Succession Law Reform Act when there is no will, and their remedy is a dependant support claim.

Money that falls into the estate may also add to the value on which estate administration tax is charged when probate is issued.

Claims that can reach a named beneficiary

A designation is not always the end of the story. If a deceased person did not make adequate provision for the proper support of a dependant, the court may order support from the estate. Plan designations are added back to the net estate when a court sets dependant support.

An application must generally be made within six months after letters probate or letters of administration are granted. The court may allow an application at any time against the part of the estate that has not been distributed.

What to do next

• Request a statement of the designation on file for each plan.
• Update forms after a marriage, separation, birth or death.
• Make sure any will mentions the plan expressly if it is meant to direct it.
• Discuss dependants, blended families and common-law partners with a lawyer.
• Ask an accountant about the tax effect before you change the named person.

Frequently asked questions