Specific, not standardized language best for revoking beneficiary designations

Testators need to get specific if they want their will to revoke their beneficiary designations, according to Ontario’s Court of Appeal. 

In a recent decision involving a dispute among a deceased mother’s four children, the province’s top court found that a standard clause revoking “all Wills and Testamentary dispositions of every nature and kind whatsoever” was not effective on the beneficiary designations for her RRIF and TFSA accounts. 

As comprehensive as the language in the revocation clause sounds, the Appeal Court confirmed a lower court’s conclusion that it could not be enforced on her beneficiary designations because it did not relate “expressly” to them.  

Beneficiary designations on life insurance policies, Tax-Free Savings Accounts, registered investments and other assets are rarely the first things that come to mind when people think of an estate plan. However, they are often among the most important – not to mention valuable – which may help explain why the Court of Appeal ruled the way it did, endorsing a cautious approach to revocation. 

In this case, the mother’s RRIF and TFSA were worth around $100,000 – not far off the valuation for the rest of her estate, which the decision says was around $160,000. 

All four of the woman’s children were originally named jointly as the designated beneficiaries of the accounts, but two of the siblings asked a court to enforce the revocation clause, so that the assets could be folded into the rest of the estate, boosting their share as the only residuary beneficiaries under the will.  

Although the judge hearing the case found that the beneficiary designation fit within the definition of “testamentary dispositions,” referenced in the revocation clause, she declined to enforce it, adding that it would “be a stretch to find that mentioning that broad category amounted to ‘expressly’ referencing the RRIF designation or the TFSA designation.” 

This case is a great reminder of the importance of keeping your beneficiary designations up to date and turning your mind to them any time you make changes to your will. Whether you want them revoked or to remain unchanged, being explicit about your intentions will minimize the chance of a legal dispute among heirs.  

That’s in addition to the main benefit of beneficiary designations: naming someone to receive the funds from your plan or policy allows the money to flow straight to them following your death, bypassing your estate. If nobody is designated, then they could become subject to probate and the 1.5-per-cent Estate Administration Tax otherwise payable on all assets in the estate over $50,000. 

Apart from avoiding an unnecessary levy on their windfall, heirs may thank you for designating them as beneficiaries because of the time and hassle they will save by staying away from the probate process. It can be a draining experience, since it routinely takes months for executors to get the court’s seal of approval via its overworked estates office, before they can start distributing assets.  

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