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Invesco Tax & Estate team | May 5, 2022

Designating direct plan beneficiaries

The Invesco Tax and Estate team shares detailed information pertaining to the administration of Invesco Canada registered plans (e.g., RRSPs, RRIFs and TFSAs) and things to consider when designating plan beneficiaries. 

General disclaimer

In our last blog post “Estate planning is more than just making a Will,” we discussed the need to review the plan periodically, emphasizing a review with each material life event. Our unique position in the industry gives us insight to some unfortunate circumstances that occasionally arise when an executor or disappointed beneficiary comes to terms with direct plan designations that do not align with their expectations. While estate planning can be a complex and daunting task, it remains a very important and worthwhile exercise. We strongly recommend that the estate planning process is facilitated in conjunction with experienced industry professionals.  

Invesco Canada’s policies have been developed over time and have evolved to permit a certain level of testamentary freedom particularly as it relates to the designating of beneficiaries directly on Invesco administered registered plans1. Occasionally, the degree of complexity of the testator’s intent extends beyond what can be reasonably accommodated by way of direct plan designations. That desired level of complexity in the estate plan is best addressed through the Will. To that extent, our policies reflect those limitations, some of which we will describe below.

The following discussion includes detailed information pertaining to the administration of Invesco Canada registered plans and the designating of beneficiaries. Invesco Canada offers registered plan trusts (as opposed to deposit or insurance-based plans). As always, it is best to confirm with us any of the information noted below.

Purpose of beneficiary designations

A beneficiary is a person or institution (e.g., certain registered charities) named by an individual to receive property upon their death. Estate law, including Wills, Powers of Attorney, and probate fees, are governed by the provinces and territories of Canada. Each province must have legislation that permits the designating of beneficiaries either directly on certain plan types (e.g., a RPP, TFSA, RRSP or RRIF), insurance policies (e.g., life insurance) or in a Will. Note the province of Quebec is governed by the Civil Code and except for certain insurance policies, a direct plan beneficiary is not permitted.

Successor designations

In respect to RRIFs and TFSAs specifically, a “successor” designation can be made directly on the plan. Only a spouse or common-law partner of the RRIF annuitant or TFSA holder can be named as successor. There is no ability to name a successor on an RRSP.

An advantage of naming a successor on a RRIF or TFSA is the greater efficiency in the transition of the plan assets from the deceased to the successor. That is, it is less administratively burdensome to facilitate and record the tax rollover of the proceeds into the successor’s registered plan as there is often fewer estate documents required for this settlement with the registered plan administrator (including those administered by Invesco Canada).

Three main advantages stand out for the TFSA successor designation. First, there is no need to worry about the filing of Canada Revenue Agency (CRA) form RC240 for the designation of an exempt contribution within 30 days after the transfer (“rollover”) contribution to the survivors TFSA. Further, there is no taxation on the investment income generated within the TFSA for the period between the date of death and the rollover date as would normally occur where no successor is designated but a rollover to the spouse or common-law partner is desired.

The same advantages that apply to naming a successor on a TFSA apply with respect to naming a successor on a RRIF. The main differences lie in the taxation of the plans themselves. With respect to a RRIF, the successor becomes the new annuitant on the plan and continues in the name of the successor. This option bypasses many of the comparatively burdensome and more administrative spousal rollover process that would apply if the spouse had been named as the primary beneficiary.

As a recap, recall that for RRIF plans, there is a deeming provision at death that requires the fair market value (FMV) of the RRIF proceeds to be included on the deceased’s terminal return. If the value decreases between death and final distribution, that amount may be carried back to offset the year-of-death deemed income inclusion whereas an increase is generally included and taxed to the beneficiaries (which may be the estate if no specific beneficiary is named).

However, if the surviving spouse or common-law partner2 is the beneficiary of the RRIF, the RRIF assets may be transferred on a tax-deferred basis to the spouse’s or common-law partner’s RRSP or RRIF. If the surviving spouse or common-law partner is age 71 or under, the RRIF assets may alternatively be transferred to an RRSP.

TFSAs have no deeming income inclusion provision at death though as previously alluded, any income generated from the date of death is generally taxable to the beneficiary unless there is a successor named and there is a timely transition of the plan to the successor by December 31st of the year following the year of death. The successor option bypasses this deeming provision and subsequent tax reporting and rollover process completely.

Designating primary beneficiaries

As with successor designations, an accountholder may designate a primary beneficiary directly on registered plans. More than one primary beneficiary may be designated on an Invesco-administered registered plan.

Where multiple primary beneficiaries have been designated and one (or more) of those primary beneficiaries have pre-deceased the annuitant, that deceased beneficiary’s interest in the account will be automatically reallocated to the surviving primary beneficiaries. This reallocation treatment is contrasted with having the pre-deceased interest fall into the estate of the deceased accountholder, or to the estate of that pre-deceased beneficiary, or to be distributed via the terms of the Will or by way of an intestate distribution.

For example, where there are three equal beneficiaries listed on a registered plan, each beneficiary will have a 1/3 interest in the account and become entitled to that interest on the death of the accountholder.

Assume one of the beneficiaries designated has pre-deceased the accountholder. Per the declaration of trust terms of Invesco registered plans, that pre-deceased beneficiary’s interest (1/3) will be reallocated in equal parts to the surviving beneficiaries’ existing interests. In this case, since there are two surviving primary beneficiaries, each will receive a one-half interest (50% of 1/3, or 1/6) of the pre-deceased beneficiary’s entitlement, raising each of their interest in the account from 1/3 to 1/2.  Upon the death of the TFSA accountholder, assuming the same two primary beneficiaries remain designated on the plan and have survived the deceased, they would each be entitled to 1/2 of the TFSA.

Designating primary and contingent beneficiaries

It is possible to name a contingent beneficiary on most client-held registered plans administered by Invesco Canada. A contingent beneficiary can be named on an Invesco Canada client-held registered plan only if a single primary beneficiary is named on the plan.

The purpose of a contingent beneficiary is to ensure that proceeds of the registered plan are paid directly to the contingent beneficiary in the event the primary beneficiary pre-deceases the accountholder. In instances where no primary or contingent beneficiary is designated, the estate of the accountholder will be entitled to the registered plan proceeds.

Contingent beneficiaries are not entitled to any proceeds from the plan unless the primary beneficiary has pre-deceased the accountholder. If a contingent beneficiary also pre-deceases the accountholder, his or her share will be reallocated in equal parts to the surviving contingent beneficiaries, if any, similar to the situation of multiple primary beneficiaries discussed earlier.

If two or more primary beneficiaries are named on a client-held registered plan, Invesco Canada’s policy prevents the annuitant from naming a contingent beneficiary. While our policy requires that only a single primary beneficiary be named in order to make a contingent beneficiary designation, no such limitation is placed on the number of contingent beneficiaries that can be named. In other words, more than one contingent beneficiary can be named on a client held RRSP, RRIF and TFSA plans.

Though it may be obvious, it is worth pointing out that we only permit one degree of contingent beneficiaries that may be designated. For instance, if Joe is the primary beneficiary with Janet and Bob as contingent beneficiaries, it is not possible to then also designate Armin as a second-degree contingent beneficiary to Janet and Bob. That level of complexity in the estate plan is best handled through the estate of the individual by way of a properly drafted Will.

Example #1

Evelyn has an Invesco RRSP and has named her spouse as the primary beneficiary. On the advice of her financial planner, she has decided to name her four adult grandchildren as equal contingent beneficiaries (1/4 each) in case her spouse predeceases her. If we assume that Evelyn’s spouse pre-deceases her, the grandchildren will stand to benefit as contingent beneficiaries upon Evelyn’s death.

As previously discussed, suppose that a contingent beneficiary has also predeceased the accountholder, their beneficial interest in the account will be automatically re-allocated to the surviving beneficiaries’ existing interest in equal parts. Accordingly, the three surviving grandchildren would each have a 1/3 interest in the plan at Evelyn’s death.

Example #2

Assume that Fred has an RRSP worth $650,000 and designated (at account opening many years ago) his three children as equal beneficiaries directly on the plan – Sheryl, Denise and Cynthia each holding a 1/3 beneficiary interest.

Let’s assume that Fred passes away in October 2021 but at the time of his death, Sheryl had predeceased Fred (assume she passed away 5 years prior). Both Denise and Cynthia reach out to the RRSP administrator to settle the RRSP plan and upon informing them of Sheryl’s death, they were surprised to learn that Sheryl’s interest in the account (1/3) will be automatically re-allocated to the surviving beneficiaries, Denise and Cynthia. Denise and Cynthia both stand to benefit as equal beneficiaries in the account (1/2 each).

The family has become upset with this result as they recall Fred wanting the grandchildren of any pre-deceased child to benefit if they predeceased him. When Sheryl passed away, she left behind a loving husband and their only child Ben, both of whom did not receive any proceeds from Fred’s RRSP.

Had Fred revisited the entire estate plan upon the death of his daughter, arrangements could have been made to ensure the intended contingent beneficiaries (the grandchildren) stand to inherit in the event of any of the primary beneficiaries’ death (the children). The estate planner may have advised to have all the assets flow into the estate and draft the Will to ensure contingent beneficiaries are adequately provided for. This may have been advised despite any probate administration tax that may apply in the province or territory. The estate planner may have also recommended the use of a trust to help manage the asset on behalf of the children and/or grandchildren that accommodate this level of complexity in the estate plan, particularly in provinces where the probate fees are material.

Designating both a successor and primary beneficiary (RIF and TFSA only)

Invesco permits registered plan holders to hold concurrent successor and primary beneficiary designations on the account. A successor designation supersedes a primary beneficiary designation. Where, at the time of death, the successor survives the accountholder and remains the spouse or common-law partner of the deceased, the successor will be entitled to all the proceeds of the account despite the designation of primary beneficiaries on the account. In the event the successor and primary beneficiary are the same person, the successor designation will take precedence. The order of priority cannot be changed on Invesco accounts; the successor annuitant designation must be removed (or renounced by the successor after the original accountholder’s death) for a primary beneficiary to have first entitlement to the account proceeds.

Locked-in registered plan types

While it is possible to designate beneficiaries on the many variations of locked-in registered plan types, very specific provincial/territorial pension regulations apply to them. Generally, the pension legislation may require that if there is a spouse/pension partner, as defined by the applicable pension act, at the time of death, that spouse/pension partner is automatically entitled to the pension proceeds. This entitlement may supersede any beneficiary designation made on the plan. Further, a locked-in plan may generally only be paid to the owner’s named beneficiary (other than the surviving spouse) in the following three situations:

  • If the spouse waived his/her entitlement to a survivor benefit;
  • If the owner of the locked-in account and his/her spouse were living separate and apart on the date of the owner’s death due to a breakdown in their relationship; or
  • If the owner of the locked-in account had no spouse when he/she died.

If there is no named beneficiary, then the survivor benefit would be paid to the owner’s estate.

Registered charities as registered plan beneficiaries

A designation that is less commonly used but acceptable is that of the designation of a charitable corporation or even a society. The designation may be motivated by tax or philanthropic reasons. It is important to note that the charity must be a corporation. Recall that a beneficiary must be a person. A charitable corporation meets the definition of “person” under all applicable provincial legislation. Effectively charitable corporations can be accepted as a designated beneficiary under Invesco Canada registered plans. 

Registered charity designations will most certainly be scrutinized by financial institutions, such as Invesco Canada, for accuracy prior to acceptance. It will be important to ascertain (prior to accepting the designation) whether the charitable organization is a corporation.  Additionally, it is incumbent on the annuitant to revisit designations for any changes that may have occurred that impact the designation which could potentially lead to delays in settlement of the registered plan on the death of the registered plan accountholder. Some examples that could lead to delays or impede the settlement to a designated plan charity (to name a few):

  1. The charity has dissolved
  2. The charity is not registered
  3. The charity is non-registered or not legally structured as a corporation or society
  4. The proper legal name of the charity was not used in the plan designation

If the registered plan accountholder wishes to make a designation of a trust or association, they should consider making gifts of this nature in their Will to be distributed as part of their estate.  


The importance of maintaining accurate and up-to-date designations is paramount in ensuring that those intended to benefit, stand to benefit.  There may be situations in life that give rise to the need to review one’s estate plan, which includes designations that were made by way of a beneficiary designation on a registered plan, such as a marriage breakdown.

Since marriage breakdown has no effect on the designation made on a registered plan, this situation may lead to disappointed estate beneficiaries (under the Will or per intestacy laws if there is no Will) challenging the designation that remained unchanged following a marriage breakdown. The claim could be that the surviving separated (or ex-spouse) holds the proceeds of the registered plan on trust for the beneficiaries of the estate. Invesco Canada is legally obligated to make a payment to the designated plan beneficiary.

Other challenges that may arise involve challenges brought forward by beneficiaries of an estate based on the doctrine of resulting trust. The extension of the application of the decision in Pecore v. Pecore3 to court cases involving beneficiary designations made on registered plans applied on several occasions. Despite the designation made by an annuitant, some court decisions have ruled that the proceeds held in a resulting trust were for beneficiaries of the estate. We have also provided links to some of the cases below.

2021 BCSC 1836 (CanLII) | Simard v Simard Estate | CanLII (English only)

2020 ONSC 1506 (CanLII) | Calmusky v. Calmusky | CanLII (English only)

2015 ABQB 769 (CanLII) | Morrison Estate (Re) | CanLII (English only)

2004 BCSC 25 (CanLII) | Neufeld v Neufeld | CanLII (English only)

1994 CanLII 16643 (MB CA) | Dreger (Litigation Guardian of) v. Dreger | CanLII (English only)

2009 CanLII 7174 (ON SC) | McConomy-Wood v. McConomy | CanLII (English only)

Another problem that may arise relates to competing claims to the proceeds under a registered plan where the plan administrator may not have received the most recent valid beneficiary designation made by the annuitant of the registered plan. A similar situation could involve a latter designation made through a Will that validly changes a prior designation that is discovered only after the death of the testator. It is imperative that intended beneficiary designation changes are sent to registered plan administrators to ensure they are recorded in an effort to avoid major issues after death.

1 For the purpose of this blog, “registered plans” means RRSPs, RRIFs and TFSAs.

2 If a child or grandchild was financially dependent on the deceased annuitant and was the beneficiary of a RRIF, the funds in the RRIF may be used to purchase an annuity that must expire by the time the child or grandchild reaches the age of 18. However, if a financially dependent child or grandchild of any age was also dependent on the deceased annuitant by reason of mental or physical infirmity, the child or grandchild may transfer the value of the deceased annuitant’s RRIF into his or her own RRSP or RRIF.

3 For more information on the Pecore v. Pecore Canadian Supreme Court ruling, read this Tax and Estate bulletin on Joint Accounts.

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The information provided is general in nature and may not be relied upon nor considered to be the rendering of tax, legal, accounting or professional advice. Readers should consult with their own accountants, lawyers and/or other professionals for advice on their specific circumstances before taking any action. The information contained herein is from sources believed to be reliable, but accuracy cannot be guaranteed