RRSP Beneficiary Named but No Will: Does the Estate Get It?

A common question after a death is whether an RRSP with a named beneficiary goes straight to that person when there is no will, or whether it first becomes part of the estate.

The short answer is that the designation generally controls. There are limits and traps, though, including tax, later designations and creditor questions. This article explains the Ontario framework in general terms.

How a designation works

Part III of the Succession Law Reform Act covers plans such as RRSPs, RRIFs, pensions and profit-sharing arrangements. A participant may designate a beneficiary by a signed instrument or by will. Because the designation can be made on the plan itself, the absence of a will does not cancel it.

When it is time to pay, the plan administrator is discharged by paying the person named in the latest designation made under the plan's terms, unless it has actual notice of a later designation or a revocation. The designated person may enforce payment. In practical terms, the institution should look to the designation, not to the intestacy rules in Part II.

Estate property versus plan property

Property a person owns at death vests in the personal representative, who holds it in trust for those entitled, but property passing by right of survivorship is outside the estate. A plan with a valid designation is a different route to the same practical result: the money is paid to the named person under the plan rather than distributed under the intestacy rules.

This also affects who needs a certificate of appointment. If the only large asset is a plan with a named beneficiary, the estate may be smaller than the family expects. Whether the institution requires paperwork from the estate before paying depends on the institution and the facts.

Can creditors reach it?

This is the part that needs care. In bankruptcy, RRSP balances are exempt from seizure except for contributions made in the 12 months before bankruptcy, and where provincial law exempts RRSPs from execution, provincial law applies. That rule is about bankruptcy, though, and it does not answer every question about a deceased person's debts.

Whether a debt owed by the deceased can reach money paid to a named beneficiary, or a named RRIF, depends on the type of plan, the wording of the designation, and the facts. Do not assume the money is untouchable, and do not assume the reverse. If the estate has significant debts, get legal advice before the money is spent or distributed.

Traps even when a beneficiary is named

• Tax still applies. The annuitant is deemed to have received the value of the RRSP property immediately before death, and it is reported on the final return. If the named beneficiary is not a qualifying survivor, the tax is not deferred through a rollover.
• A later designation wins. It revokes an earlier one to the extent of any inconsistency.
• A will designation has limits. It works only if the will expressly relates to a plan, and revoking the will also revokes a designation made in it.
• Dependants may have a claim. A court may order support from an estate where the deceased did not make adequate provision for dependants, with or without a will. A support application generally cannot be made more than six months after the grant of letters probate or letters of administration, though the court may allow a late application for any portion of the estate remaining undistributed. How that interacts with money paid out under a designation is a question for a lawyer.
• Post-death growth is taxed. Income earned in the plan after death is included in the income of the designated beneficiaries, or of the estate if there are none.

What to do next

If you are the named beneficiary, the steps are usually to confirm the designation in writing with the institution, ask what documents it needs, and speak to an accountant before spending the money. If you are the person administering the estate, find out who owes tax and who will pay it, because the final return reports the value even where the money goes to someone else.

• Get a copy of the designation from the financial institution.
• Check for a later designation or revocation.
• Confirm whether the plan is an RRSP or a RRIF and who the beneficiary is.
• If the beneficiary is a spouse, note the rollover deadline of December 31 of the year after death.
• Ask a lawyer whether estate debts or a support claim could affect the money.
• Ask an accountant how the final return will handle the deemed income.

Frequently asked questions