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.
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 2023, 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 alternative for spouses and common law partners named as beneficiaries of a RRIF. An advisor trained in retirement income planning can help navigate clients through these life changing events, preserving values and structures where it makes sense.
© 2020-2023 by Peter A Wouters. Republished with permission by Peter Wouters. For the complete list of articles, please visit here.
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Updated October 2023