Comments that are thought to be disrespectful or offensive may be removed by our Benefits Canada admins. A Increase font size. Your executor will be responsible for distributing the death benefit. In Ontario, the ability to designate a beneficiary by Will to receive benefits from a pension plan on a member’s death is found in sections 50 and 51 of the, As with any asset, when making a pension plan beneficiary designation it is important to ask: who pays the tax? A Reset font size. You can also name your estate as your beneficiary. If you die after you retire, the plan may pay a death benefit to your beneficiary(ies) based on the pension option you chose when you retired. A Decrease font size. document.write(CurrentYear) Information on Employment Insurance (EI), pensions, benefits and taxes, for those who work or live outside of Canada. The beneficiary(ies) you name while you are working are entitled to a portion of your pension if you die before retirement. After years of consultation, the Canadian Institute of Actuaries’ Actuarial Standards Board has finalized changes to key components of how commuted values payable from pension plans are calculated. Sometimes you have a choice of whether the surviving spouse will receive 50 pecent or 75 percent of your pension benefit. Read: How to make a Power of Attorney ironclad, But commonly, children are named as beneficiaries of both the estate and any registered plans. Maria could choose to compensate her nephews for the disproportionate results, but is not legally required to do so. You can also name one or more alternate beneficiaries for each beneficiary. Let’s assume again a simple beneficiary designation, where Maria was the only living beneficiary. Contacting your beneficiary(ies) if you die. There are different factors that can affect how much you'll receive, such as time taken off from work to care for young children. However, members of a plan generally have the ability to designate a non-spouse beneficiary to receive benefits in the event that they die with no spouse surviving. Yaelle Gang, the Canadian Investment Review | February 3, 2020. Your beneficiaries can be family members, friends, charities or organizations that are important to you. Guaranteed Income Supplement And they could also adjust their commuted value to reflect the funded status of the plan if they wish to do so.”, Under target pension arrangements, the accrued benefits can be reduced to manage the finances of the plan, says Benjamin. Includes information on eligibility criteria, how to apply and amounts. when the residuary beneficiaries of an estate bear the tax burden of a RRSP that goes to a different beneficiary, as in the recent case of Morrison v. Morrison. This usually helps avoids probate tax on the registered plan as well, keeping it out of the reach of the deceased’s creditors, speeding the release of the proceeds and perhaps reducing estate administration costs. However, the RRIF proceeds would have been considered income in your client’s terminal year. A taxable benefit you may be eligible for if you are unable to work because of a disability. Thus, while Alfonso’s sons may be shut out of this entitlement (at least initially, subject to their aunt’s inclination), they will not bear any of the tax liability. All Rights Reserved. Read: Industry consulting on commuted-value standard in pension payments. Suppose your client names her son, Alfonso, and daughter, Maria, as beneficiaries of both the estate and a RRIF, but Alfonso predeceases the client. If clients aren’t explicit about designations, there can be big consequences. Due to the coronavirus disease (COVID-19) outbreak, there are changes to this program. “The thinking is that, for these types of plans, the pension promise is fundamentally different where it does anticipate a potential reduction in accrued pensions in order to balance the finances of the plan and therefore the approach for calculating commuted values should be different.”. (For the sake of discussion, let’s assume no minor children or disabilities to contend with, which would add more wrinkles to the analysis.). Doug Carroll, JD, LLM (Tax), CFP, TEP, is Practice Lead — Tax, Estate & Financial Planning at Meridian. For enquiries, contact us. For enquiries, contact us. Starting in 2019, the CPP will gradually increase due to the CPP enhancement. However, you can start receiving it as early as age 60 or as late as age 70. Benjamin advises plan sponsors to think about the various areas these changes could affect. Depending on the tax positions of the estate and beneficiaries, this could mean more or less tax to be paid.