Can You Use a Power of Attorney to Change a RRSP Beneficiary?

Keith Hawthorne designated his common law spouse, Colleen Desharnais, as the beneficiary of his Registered Retirement Savings Plan at the Toronto Dominion Bank. He also appointed her his attorney under his enduring power of attorney. In fact, he completed two powers of attorney naming her as his attorney each time. But, Keith Hawthorne did not make her beneficiary of his will.

Mr. Hawthorne suffered a brain tumor. He had surgery. Twice. But he lost his competency to make decisions, and he never recovered. Ms. Desharnais was able to assist with his finances, using the power of attorney.

A representative of TD Securities Inc., which is a related company to the Toronto Dominion Bank, suggested to Ms. Desharnais that she could get a better return for Mr. Hawthorne if she transferred the RRSP to TD Securities Inc. She followed the advice, transferring the RRSP to TD Securities Inc.

When she transferred the RRSP, she did not complete the designation of beneficiary form. She assumed the beneficiary would remain the same. TD Securities Inc.’s representative did not advise her about completing the form.

Mr. Hawthorne passed away the following year. TD Securities Inc. paid the RRSP to Mr. Hawthorne’s estate because the designation of beneficiary form was not completed when the RRSP was transferred to TD Securities Inc.

Ms. Desharnais sued both the Toronto Dominion Bank and TD Securities Inc.

In the Supreme Court of British Columbia, Desharnais v. Toronto Dominion Bank, 2001 BCSC 1695, Mr. Justice Clancy held that Ms. Desharnais’ power of attorney did not give her the legal authority to change the designated beneficiary of a RRSP.

Although, the power of attorney gave Ms. Deshaanrais the power to do on behalf of Mr. Hawthorne anything that Mr. Hawthorne could lawfully do by an attorney, this power did not include things that were testamentary (or, as I like to think of it, Will-like) in nature.

Mr. Justice Clancy adopted the following statement from the Legal Education Society of Alberta in its report entitled Enduring Powers of Attorney; Dependent Adults; Living Wills (1991):

It is questionable whether a donor may designate a beneficiary of a pension, insurance policy or Registered Retirement Savings Plan [using a power of attorney]. In the absence of statutory authority to designate a beneficiary, these acts would be testamentary in nature, since they would be "dependant on death for its vigour and effect” (footnote omitted), and accordingly must comply with the Wills Act. It might be possible to designate a beneficiary by an attorney while the donor has capacity but it would be advisable for an attorney to seek the advice and directions of the court if his donor no longer has capacity.

The change in beneficiary—from Ms. Desharnais to no one—was not legal. According to Mr. Justice Clancy,

A valid transfer of the RSP would have required the continuation of the designation of Ms. Desharnais as beneficiary. That action would have been authorized by the power of attorney. It would not have been testamentary in nature.

Mr. Justice Clancy found that TD Securities Inc. and its representative owed Ms. Desharnais a duty to inquire if Mr. Hawthorne had named a beneficiary on the Toronto Dominion Bank RRSP, and advise her to complete the designation to maintain the beneficiary. He held that TD Securities Inc. was liable to pay her the amount of the RRSP she would have received as the beneficiary plus interest on the basis that it was negligent and in breach of its fiduciary duty (or duty of loyalty) to her.

Mr. Justice Clancy also held the Toronto Dominion Bank liable to Ms. Desharnais, on the basis that the Toronto Dominion Bank had a duty to hold the funds instead of permitting an illegal transaction. But, the British Columbia Court of Appeal reversed Mr. Justice Clancy’s holding that the Toronto Dominion Bank was negligent. The Court of Appeal said that Ms. Deshnarnais had not met the onus to establish the scope of the Toronto Dominion Bank’s duty of care to her.

The Court of Appeal did uphold the judgment against TD Securities Inc. You can read the Court of Appeal’s decision here.

It is important that anyone appointed an attorney under a power of attorney, and the financial institutions that deal with the attorney, recognize the limitations on what an attorney may lawfully do under a power of attorney. In this case, the financial institutions involved didn’t until it was too late.