Importance of designating Beneficiaries as part of Estate Planning.

Introduction
Estate planning is the process of creating an action plan for distribution of your assets after death. Assets can include anything from real estate or a business, to bank accounts, investments and personal belongings. One goal of Estate planning is to minimize fees and taxes and provide for loved ones in a timely manner.
 
One important tool of Estate planning that may be helpful for many individuals is to designate beneficiaries for certain assets such as registered investments (RRSP, RRIF, RESP, TFSA etc.), Life insurance and Pension plans (the “Investments”). Of course, the use of a beneficiary designation has advantages and disadvantages and needs to be considered in the context of an overall estate plan, so it is important to get estate planning advice.  
Background
Many people buy the Investments to protect their family’s financial future. If the policyholder has not added a beneficiary, the estate will inherit its assets upon death, and this involves administration. This could lead to several issues such as:
  • Delayed money disbursement.
  • Increased probate cost and taxes.
  • Inability to allocate money to specific recipients.
Solution
This situation can be better planned if the policy holder declares a beneficiary according to sections 76 to 79 of Insurance Act. The beneficiary designations can be done in three different ways:
  • Using the declaration form provided by insurance company;
  • By filing a separate declaration document with the insurance company.
  • By designating beneficiary, the policyholder can ensure that the insurance proceeds are paid directly to the intended recipient(s). If they want to ensure that the proceeds are used to specific purpose, such as paying for a child’s education, they can name the trust as the beneficiary a specify the conditions.
 
Designating a beneficiary on your investments is important for several reasons:
Ensuring your wishes are followed: By designating a beneficiary, you are specifying who should receive the death benefit from your life insurance policy. This can help ensure that your wishes are followed and that the money is distributed according to your wishes.
Avoiding probate: By designating a beneficiary, you can avoid having the death benefit go through probate, which can be a time-consuming and costly process.
Protecting your loved ones: Life insurance is often purchased to provide financial support to your loved ones in the event of your untimely death. By designating a beneficiary, you can help ensure that your loved ones receive the money they need to pay bills, cover living expenses, and maintain their quality of life.
 
Flexibility
Designating a beneficiary can also provide flexibility in how the death benefit is used. For example, you could name a trust as the beneficiary to provide ongoing financial support for your children or other dependents.
If the policyholder’s circumstances changes, they can indicate them with their current wishes. Though it can be changed any time by the policyholder by saying that they are still mentally competent and have legal capacity to make such decisions
 
Legal Disclaimer
Remember that the content in this blog is for knowledge purpose only and should not be used as legal advice. This information is based on legal theories that are generally accepted and not applied in every situation. For more information and detailed legal advice feel free to get in touch with us at Cube Law corporation.