Did you know that not naming a
beneficiary can cost your estate extra taxes on your death? Anytime you
do not name a beneficiary on your registered plans you are adding to the
probate taxes payable on death. Not only would your estate have more
taxes to pay but if your will is challenged, this money could get tied up for
years sitting in limbo.
Most people have a named
beneficiary on their insurance policies. So why doesn't everyone have a
named beneficiary on their registered plans? I see situations where it is
overlooked, especially on group plans at work. Until I get to review a
group plan with a client, they were not even aware they had no beneficiary
named. I have also seen this happen at registered plans at the bank.
Sometimes people are unsure who to
leave their money to when they do not have a spouse, partner, children or close
relatives. This is no excuse. There are charities that could
benefit from this money or close friends you could name. What you need to
know is your beneficiary could change anytime your circumstances change, so
naming someone is better than not naming anyone. Anytime you change your
mind about who you named, it can be changed with your financial institution or
the benefits people at work that administers your group plan.
Naming your estate as beneficiary
on your registered plans automatically add to the taxes your estate will pay.
You can name more than one person
on any of your registered plans. So where should you have a named
beneficiary? The following is some of the more common places: group
plans at work including retirement plans, TFSA and DPSP; registered plans at
financial institution which include, retirement savings plans (RSP), locked in
retirement accounts (LIRA) and tax free savings accounts (TFSA). There
are other registered accounts such as LIF, RIF, etc. that should also have a
named beneficiary. Most plans with an insurance company allow for a named
beneficiary as well.
You cannot name a beneficiary on
non-registered investment accounts; bank accounts etc. If you have a
segregated account with an insurance that is non-registered, they will allow a
named beneficiary because of the insurance wrapper the product has.
If you do not want to pay any more
taxes than you actually have to on your estate,
you may want to review all registered plans you have. Ensure you have a named
beneficiary wherever possible because having a name does matter.
Linda
J. Levesque, CFP®, FMA, FCSI®
Sr.
Investment Advisor
Director,
Private Client Group
HollisWealth Insurance Advisor
HollisWealth Insurance Advisor
HollisWealth
Insurance Agency Ltd.
Levesque
Wealth Planning
HollisWealth,
a division of Scotia Capital Inc.
One Corporate Plaza, 2075 Kennedy Road, 5th Floor, Toronto, ON M1T 3V3
Tel: 416-412-8018 / 1-800-322-4030 Fax: 416-332-6772
linda@levesquewealthplanning.com
One Corporate Plaza, 2075 Kennedy Road, 5th Floor, Toronto, ON M1T 3V3
Tel: 416-412-8018 / 1-800-322-4030 Fax: 416-332-6772
linda@levesquewealthplanning.com
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