The Importance of Beneficiary Designations
Estate planning is a difficult and complex process with many moving parts and considerations to keep in mind. If you are looking to create a will or update your existing will, it is crucial to understand what beneficiary designations are and how they can affect the distribution of your estate. As experts in wills, estates, and trust law, the team at Linley Welwood understands the importance of beneficiary designations. That is why our experts have compiled some information to explain what they are, why they are important, and what to consider when designating a beneficiary.
What are Beneficiary Designations?
Beneficiary designations refer to the process of specifying who will receive the assets in a testator’s RRSP, RRIF, or TFSA after they have passed away. If a designation is made to specific beneficiaries, then those assets pass to the person(s) named. If a testator does not make a designation, those assets become part of their estate and will be dealt with by the executor in accordance with the terms of their will.
Why are Beneficiary Designations Important?
Designating a beneficiary is crucial for estate planning purposes as it allows the asset or plan that is designated to be paid directly to the designated beneficiary upon the death of the holder. When a benefit plan or asset is paid directly to the designated beneficiary, that asset or plan is kept outside of the estate, which means that there will be no probate fees payable on the value of the asset. Probate fees can add up quickly in BC, making beneficiary plan designations an important estate planning tool as they can significantly reduce costs.
Factors to Consider When Designating a Beneficiary
There are several factors to consider when determining beneficiary designations. These factors include but are not limited to:
- Any costs associated with probate that can be avoided through a designation.
- The number of alternate beneficiaries that are required.
- Whether a trust is needed or not.
- The risk of a separate designation not being updated when the client updates the will.
- Privacy—if a designation is made in the will, the entire will shall be disclosed to each of the plan administrators.
- Whether the designation is irrevocable or not.
- Whether there is a need or ability for the power of attorney or committee to be able to change the designated beneficiary.
To learn more about beneficiary designations or other crucial areas of wills and estates, get in touch with the team at Linley Welwood. We can be reached through our online contact form and will be happy to answer any questions you may have regarding our services or your will.