Saturday, May 18, 2013

Beneficiary Designations of Benefit Plans Under the New Wills, Estates and Succession Act

The new Wills, Estates and Succession Act (“WESA”), which will come into force on March 31, 2014, brings much of British Columbia’s legislation related to succession under one Act. Although much of WESA deals specifically with wills and estate administration, it also has provisions related to other estate planning, including designations of beneficiaries in various benefit plans.

Part 5 of WESA covers designations of beneficiaries of benefit plans. These are defined in the legislation, and include pension plans, registered retirement savings plans, registered retirement income funds, annuities and tax free savings accounts. But significantly, Part 5 does not apply to contracts of insurance and insurance beneficiary designations that are governed by the Insurance Act. We don’t quite have one-stop shopping for our succession legislation.

Here are a few of the highlights:

1.   A participant in a benefit plan may designate a beneficiary on death, or alter or revoke a designation. It must be in writing. It cannot alter or revoke an irrevocable designation. It must be “signed by the person making it, or by another person in the presence of the person making it and by his or her direction and the signature may be in the name of the person making it or the person signing.” It should be noted that the beneficiary designation does not require the same witnessing formalities as a will.

2.   You will be able to make a beneficiary designation of a benefit plan in your will, but the designation must expressly relate to the plan. If you do make a designation in the will, you may later change the designation without having to make a new will, if the change meets the requirements set out above. It is possible to make a valid beneficiary designation of a benefit plan in a will even though the will itself is not valid as a will, for example if the will-maker signs the will, but does not have it properly witnessed.

3.   Section 82 will allow you to appoint a trustee for a beneficiary of a benefit plan. This can be quite important. For example, if you wish to provide for someone with a disability who cannot manage his or her own money, you can create a trust for that beneficiary. There was (and is until WESA comes into force) some uncertainty about whether you could designate a trustee as a beneficiary of some plans, such as RRSPs. My view was that you could, but some financial institutions disagreed, and the law will now be clearer.

4.   If the participant in a benefit plan becomes incapable of managing his own affairs, there is a provision that would allow a nominee, which includes an attorney acting under and enduring power of attorney, and a committee appointed under the Patients Property Act, to make a new designation of the same beneficiary of a plan. This would be useful if, for example, funds are moved from one Registered Retirement Savings Plan to another. The attorney or committee could designate the same beneficiary the participant had designated in the previous plan.

5.   There is also a broader provision, section 85(3) that will allow an attorney acting under an enduring power of attorney or a committee, to make a designation appointing or changing a beneficiary of a benefit plan, but only if authorized to do so by the court. Accordingly, if the participant in a plan had never designated a beneficiary of say his or her RRSP, the attorney would have to apply to court for authorization to make a designation.

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