Keeping an RRSP Beneficiary Designation From Skewing an Estate

The situation

Andre's father died in the spring, leaving a modest estate behind: a house in North Bay that sold for roughly $150,000 after the mortgage and selling costs, and a Registered Retirement Savings Plan (an RRSP, a tax-deferred retirement account) worth about $50,000. The will was simple and clear. Everything was to be divided equally among his three sons — Andre, Arman, and Darius — after debts and expenses were paid. Andre, a line cook, was named executor, the person legally responsible for gathering the estate's assets, paying its debts, and distributing what remains according to the will. Arman worked as a hotel front-desk supervisor; Darius lived out of town. None of the three had handled an estate before.

Andre came to Treadstone Law needing help applying for probate — formally called a Certificate of Appointment of Estate Trustee — the court order that confirms his authority to act and that banks and land registries would require before releasing the house sale proceeds. While pulling together the paperwork, our team asked to see the RRSP statements alongside the will, a routine step in any estate file. That routine step is what turned up the problem.

What the review found

The RRSP had a named beneficiary on file with the financial institution: Andre, and Andre alone. The designation had been made years earlier, well before the will was signed, during a period when Andre was the son living with his father and helping him manage his finances. Nobody had thought to revisit it since.

In Ontario, a beneficiary designation on a registered plan like an RRSP is a legal instruction in its own right. Under the Succession Law Reform Act, a person can name a beneficiary directly on the plan, and that designation controls who receives the funds — it does not need to go through the estate at all, and it is not overridden by a general instruction in the will unless the will specifically revokes or replaces it. This one did not. The father's will simply said everything should be split equally three ways; it never mentioned the RRSP by name.

That created two separate problems layered on top of each other. The tax problem was actually good news: because the RRSP had a valid named beneficiary, it would pass directly to Andre outside the estate, meaning it would never be counted when calculating Ontario's estate administration tax — the probate fee charged on the value of assets that require a Certificate of Appointment. There is no tax on the first $50,000 of estate value, and roughly 1.5% on the value above that. With the RRSP excluded, only the $150,000 house sale proceeds would be subject to the tax, working out to roughly $1,500, instead of close to $2,250 if the full $200,000 estate had to be probated.

The fairness problem was the real risk. If the RRSP simply flowed to Andre outside the estate, and the house proceeds were then split three ways under the will, Andre would end up with his one-third share of the house plus the entire $50,000 RRSP — about $100,000 in total, while Arman and Darius would receive roughly $50,000 each. That was not what their father's will said, and it was not what Andre, Arman, or Darius understood their father to have intended. An old paperwork oversight was on track to hand Andre twice what his brothers received, from an estate meant to be split evenly.

What we did

1. Confirmed the designation was valid and irrevocable by the will. We checked the plan's beneficiary form against the date of the will and confirmed the will contained no clause revoking prior designations. That meant the RRSP was legally Andre's, outside the estate, regardless of what the will said about splitting things equally — the designation could not simply be ignored or overridden after the fact.
2. Explained the estate administration tax benefit and made sure it was preserved. Because the RRSP already passed outside the estate, we advised Andre not to disturb the designation or route the funds back through the estate voluntarily. Doing so would have thrown away a genuine tax saving for no legal reason, since the designation stood on its own regardless of what happened with the rest of the estate.
3. Read the will's equalization language carefully. The will's instruction to split the estate equally, read together with Ontario succession law, supported treating the RRSP as an advance on Andre's one-third share rather than as a windfall on top of it. This is a well-established approach in estate administration: a designated asset outside the estate can still be accounted for when the executor calculates what each beneficiary should receive from the assets that remain, so the testator's overall intention of an equal split is respected even though one asset bypassed the estate entirely.
4. Recalculated the split using the RRSP as an offset. With the RRSP treated as $50,000 already advanced to Andre, the remaining $150,000 house proceeds, less the roughly $1,500 estate administration tax and other closing costs, were divided so that Arman and Darius each received a larger share of the house proceeds while Andre received a smaller share — bringing all three sons to approximately the same total once the RRSP was added back into Andre's column.
5. Documented the arrangement in writing before any funds moved. We prepared a release and consent for Arman and Darius to sign, setting out plainly how the RRSP was factored into the calculation and confirming their agreement to the adjusted split. This protected Andre from a later claim that he had favoured himself as executor, and gave Arman and Darius a clear record of the reasoning rather than a verbal explanation they would have to take on faith.
6. Filed for probate on the reduced estate value. The application for the Certificate of Appointment reflected only the assets that actually required probate — the house proceeds and a small amount left in a bank account — keeping the estate administration tax to the lower figure the RRSP exclusion made possible.

The outcome

Probate was granted a few months after the application was filed, in line with the usual pace for an uncontested estate of this size. The estate administration tax came in at roughly $1,500, several hundred dollars less than it would have been had the RRSP been folded back into the estate unnecessarily. Andre received the RRSP directly from the financial institution, as the designation required, and a reduced share of the house proceeds. Arman and Darius each received a larger share of the house proceeds to bring their totals in line with Andre's. All three ended up with approximately equal value from their father's estate, consistent with what the will intended, and each signed off on the calculation before a dollar changed hands.

The case turned entirely on catching the mismatch early. Had Andre distributed the RRSP and the house proceeds separately, treating them as two unrelated pools of money, he would have technically followed the letter of two different documents while badly missing his father's actual intention — and quite possibly triggered a dispute with his brothers that could have ended up in court, eroding the estate's value in legal costs on all sides. Instead, the same beneficiary designation that saved the estate real money in tax became the tool used to keep the distribution fair, once it was read correctly against the will rather than in isolation.

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