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RRIFs and changing beneficiaries to annuitants

Investments, Personal Finance

Posted by Peter Wouters

Dec 10, 2020 10:00:00 AM

Directeur, Planification fiscale et successorale et planification de la retraite, Gestion de patrimoine
Placements Empire Vie

Smiling senior couple riding bicycles on a nature trail

Bill and Rosalind are friends of Sam and Christine, whom you met in this article. They live in Halifax. Bill died of a stroke just before his 70th birthday. He had named his common law partner, Rosalind, as beneficiary of his Registered Retirement Income Fund (RRIF) via his will, which he had set up earlier in the year. Bill had chosen mutual funds as the underlying RRIF investment. Rosalind had wanted an arrangement similar to the one recommended to Sam and Christine. She simply wanted to continue the income stream that had just started a few months earlier. Now, she has to deal with the financial institution selling all of the investments and rolling the value of Bill’s RRIF at death to a RRIF in her name. She also has to pay tax on the minimum payments that have yet to be paid out and on any growth in the plan since Bill died. Does she have an alternative?

Rosalind, as the sole beneficiary, can be named as “successor annuitant” under the original plan contract, provided that the legal representative for the deceased annuitant, Bill consents to the election.

Smiling senior couple eating ice cream on a cone

 

Rosalind, as the sole beneficiary, can be named as “Successor Annuitant” under the original plan contract, provided that the legal representative for the deceased annuitant, Bill consents to the election. Rosalind, as the legally recognized common law partner can get together with Bill’s legal representative and jointly file Form T1090, Death of a RRIF Annuitant – Designated Benefit for Year 20__, to designate all or part of the amounts paid to the estate as a designated benefit received by the spouse or common law partner as a qualified beneficiary. By the way, the surviving spouse or common law partner may be the executor or estate administrator.

Rosalind can now take over the RRIF through a name change executed with the financial institution and continue to receive the payments as Bill had originally structured. Again, keep in mind that when the successor annuitant takes over a guaranteed withdrawal benefit contract, like Empire Life’s Class Plus 3.0, a reset of the death benefit (if the successor annuitant is less than 80 years old), the income base, and the guaranteed income takes place. The guaranteed income available from the contract could increase or decrease as a result of these resets.

It is not unusual to find that estate lawyers, executors, financial advisors and financial institutions miss this winning alternative for spouses and common law partners named as beneficiaries of a RRIF. A trained retirement income planning advisor can help navigate clients through these life changing events, preserving values and structures where it makes sense.

 

© 2020 by Peter A Wouters. Republished with permission by Peter Wouters. For the complete list of articles, please visit here.

 

Related Articles:

RRIFs part 1: RRIFs and successor annuitant benefits

RRSP beneficiary doesn’t automatically carry over to a RRIF

RRIF transfers to spouse using segregated funds


A description of the key features of the individual variable insurance contract is contained in the Information Folder for the product being considered. Any amount that is allocated to a Segregated Fund is invested at the risk of the contract owner and may increase or decrease in value. Please read the information folder, contract and fund facts before investing. Performance histories are not indicative of future performance. Policies are issued by The Empire Life Insurance Company.

This blog reflects the views of the author as of the date stated. This information should not be considered a recommendation to buy or sell nor should it be relied upon as investment, tax or legal advice. Empire Life and its affiliates does not warrant or make any representations regarding the use or the results of the information contained herein in terms of its correctness, accuracy, timeliness, reliability, or otherwise, and does not accept any responsibility for any loss or damage that results from its use. 
 

December 2020

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