Why You Must Name a Beneficiary
The sad truth about money and material things is that you can’t take them with you to your grave. All that must be left to someone, and someone dear for that matter who might use it well. This is why you name a beneficiary wherever possible.
What do you Mean by a Beneficiary?
Since you cannot take your money and material belongings with you when you die, it is only a wise thing to decide who gets to keep all that. And it’s a move that holds good not only in Canada but universally.
So, a beneficiary is a person, or an organization, or a business, that is entitled to the possession of these belongings after your death.
The Reason Why You Must Name a Beneficiary
Naming a beneficiary in your bank accounts, life insurance, etc., is very simple and takes just a minute or two. Also, it is a no-brainer because you are the best judge of who will need or can manage best these possessions when you are gone.
It’s Strictly Private
And who your beneficiary is, remains documented privately. it is not available for everyone’s view. You do not need to make it public; only the beneficiary needs to know. So, that way you can avoid any situations where people other than the beneficiary should know and consequently feel jealous or complain about not being nominated for a fair share.
Support for your Spouse
Of your spouse or your common law partner is your beneficiary, upon your death, the money in our RRSP/TFSA will be transferred directly to your spouse’s RRSP/TFSA even in the case wherein your spouse’s account has no contribution room.
It is the financial institutions whose services avail, that take care of the paperwork. There is usually no need to hire a lawyer, thus no need to spend delay or probate fees for sorting out your will. in case you didn’t know, the probate fees vary in every province, and can cost you hundreds or even thousands of dollars, based on the size of your account.
In some accounts like in insurance policies and even segregated funds, there is a provision of naming a “contingent beneficiary.” A contingent beneficiary is the beneficiary who will have a claim on your accounts and money in case your original beneficiary dies before you.
Should Professional Advice Matter?
Well, you won’t really need a lawyer or an accountant to do this, that is something we’ve discussed already. However, while you may usually be the best judge of who your beneficiary should be, professional advice may help significantly.
For instance, in case you want to leave money to someone who is currently minor, you might want to simply name a beneficiary. What you might do is create a trust, instead. This legal document will define the way in which the minor will receive the money and how the money will be managed till the minor comes of age.
Such intricacies can be sorted out with seasoned advice from a financial planning advisor. If your advisor recommends, then you must rope in your lawyer and keep them abreast of all such decisions.
Pro Tips for Naming a Beneficiary
- A beneficiary can be named for:
- RRSP (Registered Retirement Saving Plan)
- TFSA (TaX-free Savings Account)
- LIRA/LRSP (Locked-in Retirement Account/ Locked-in Retirement Saving Plan)
- Insurance Company-issued Investment like Segregated Fund.
- You can also name a different beneficiary for each of the different accounts.
If you are caught in doubt about naming a beneficiary for all or any of your accounts, you need professional advice. We’d love to help. Simply get in touch with us and let us help you take one of the most important decisions of your life.