Ensure the Member’s Designation of Beneficiary Matches the Intent of Their Will
Challenges can be created for estate representatives, and indirectly your credit union, if a designation of beneficiary on a registered plan contract conflicts with the intent of the member’s Will.
Consider the following hypothetical scenario:
A woman has died leaving a child under the age of majority. In the deceased’s Will she named her parents as executors and trustees of the resulting trust for the child. The deceased left an RRSP with a valid designation of beneficiary on the contract naming the child (the child is not mentally incapacitated). The father of the child is the legal guardian of the person and the property of the child.
The question arises; does the guardian have right to any information regarding the RRSP?
Yes. As the father is the legal guardian, he has full authority to deal with the RRSP, as it is the child’s property. It became the child’s property when it passed directly to the child via the designation of beneficiary on the RRSP contract.
The Will that established the trust for the child does not supercede the designation of beneficiary on the registered plan contract unless the Will specifically revoked all designations of beneficiary or made a subsequent designation (not a bequest) in the Will naming the Estate as the designated beneficiary. In this scenario, the Will did not.
Therefore, the RRSP does not form a part of the estate or the resulting trust and does not fall under the authority of the deceased’s parents, either in their role as executors or trustees; it is the child’s property.
In our scenario, it was the deceased’s intent that the RRSP be handled by her parents in their role as executors and trustees rather than the child’s father as legal guardian. However, legislatively, he is within his rights as guardian to deal expressly with the RRSP.
A simple illustration of why it is so important to ensure that a designation of beneficiary on a registered plan contract matches the intent of the member’s Will.
*Reprinted from the Trust Services Bulletin with permission from Concentra Financial. This article does not constitute legal opinion or advice. Readers are cautioned not to act on information provided without seeking specific advise with respect to the particular situation.