Conflicts between Beneficiary Designations
Certain types of assets, such as life insurance proceeds or RRSPs, may be designated to be paid out directly to a beneficiary upon the death of the owner. In such a case, the asset does not pass through the estate and Estate Administration Tax is not paid on the value of the asset. It is not strictly required that they be referred to in a will, as the beneficiary designation in the plan itself is sufficient to gift the asset on death. However, it is possible, as per section 51(1) of the Succession Law Reform Act, RSO 1990, c S.26 (“SLRA”), to refer to a plan in a will, either to confirm the designation in the plan itself, or to make the designation.
However, an issue may arise if there is a beneficiary designated in both the plan and the will, but the named beneficiary is not the same. It is then necessary to determine which designation will prevail.
Section 52(1) of the SLRA states that a “revocation in a will is effective to revoke a designation made by instrument only if the revocation relates expressly to the designation, either generally or specifically.” Accordingly, if there is a conflict between the will and the plan with respect to the designated beneficiary, as long as the will expressly refers to the plan designation, the will should govern the ultimate beneficiary of the plan. Moreover, it may be possible to determine which designation will prevail by looking at which was made most recently. As per section 52(2) of the SLRA, a later designation revokes an earlier designation, to the extent of any inconsistency.
There is also case law to support overriding a plan designation based on the clear intention of the testator. In McConomy-Wood v McConomy, 2009 CanLII 7174 (ONSC), the testator designated one of her three children, Lisa, as the beneficiary of her RRIF a few weeks prior to her death. However, throughout her life, it was the testator’s consistent intention, frequently expressed to her children, that they would all be treated equally and that all of her assets would be divided equally amongst the three of them.
The will did not expressly refer to the designation, but it named Lisa as the sole estate trustee to hold the assets of the estate in trust for all three siblings equally. The judge in McConomy-Wood v McConomy therefore found that the intention of the testator with respect to the RRIF designation was that her daughter hold the proceeds of the RRIF on the same terms as the estate.
The most prudent way of dealing with potential conflicts is to be aware of beneficiary designations in the plans themselves. If you choose to also refer to the designation in your will, take the time to verify who the named beneficiary is and to be consistent between the will and the plan, in order to avoid any conflicts or confusion.
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