The story of a Halifax woman’s attempts to receive her deceased husband’s RRSP savings has highlighted the difficulties in making changes to what happens to someone’s estate in the event that they die without a will that may or may not accurately reflect their wishes. The story, which was recently reported by the CBC, involves an RRSP account that was designated to go to the deceased’s mother in the event of his death, leaving his wife and child without access to his savings.
A brief struggle with cancer
The deceased went to the emergency room in 2018, complaining that he wasn’t feeling well. He was ultimately diagnosed with stomach cancer, which had already spread to his lungs. He died just three weeks later, leaving behind a wife and a 13-year old daughter.
A terrible surprise
The mother, struggling with the grief of losing her husband, soon learned that his RRSP, which was worth $685,000, listed his mother as its beneficiary. This means that even though his will stated he wanted to leave everything to the mother, the funds in the RRSP were not hers to claim. The mother explained that when her husband first opened his RRSP he was young and unmarried, and so he listed his mother as the beneficiary. She thinks he simply forgot about it, adding that the RRSP was listed amongst their assets in his will.
To make matters worse, while the RRSP wouldn’t be going to the estate, the estate would be on the hook for the tax bill, leaving it with a tax burden of over $300,000. Fortunately for the deceased’s family, he had an insurance policy that covered the tax obligations of the estate.
Can the will override the RRSP beneficiary?
The mother hired a lawyer who told the CBC, “We took a look at whether his will would change the designation he had left in his RRSP and we, unfortunately, came to the conclusion that it wouldn’t fix it.” Her lawyer added that such situations are common and that people often neglect to update their documents when life situations change, such as the addition of a child or a spouse.
Differences between RRSPs and Pensions
The story explained that in Nova Scotia, pensions are registered in the province and fall under the Pensions Benefits Act. Under the Act, when a pension holder dies, their pension funds automatically go to their spouse, even if another beneficiary is listed. A friend of the family, who is also a consulting actuary with a specialty in pensions, told the CBC, “for one spouse to be able to designate a huge chunk of their estate to somebody outside of the marriage, that would be pretty inconsistent with the rest of the way we treat marriage and partnerships.”
The wife is hoping to change the law, but the CBC reported the province said it was a federal issue, while the CRA told CBC it was covered by provincial legislation.
Derfel Estate Law is a boutique estate litigation law firm. Our practice focuses on all aspects of estate disputes, as well as estate administration and probate. We act for beneficiaries, guardians, executors, trustees, and others. Our estate lawyers can help with a wide range of estate litigation matters. To learn more or to schedule a consultation, please call us at 416-847-3580 or contact us online.