The Importance of Beneficiaries

When planning for retirement, a key step is designating your beneficiaries. Completing the Designation of Beneficiary form allows you to state where your assets will go after your death helping the process go smoothly for your family. 

Designating beneficiaries enables assets to bypass the probate process, reducing fees and allowing your beneficiaries to receive their benefits faster. Probate is the legal process where your executor applies to the court to approve the will, and it can be lengthy, causing delays.

By having a beneficiary(ies), your assets with beneficiary designations may avoid the mandatory provincial intestacy rules. These rules determine which individuals will receive your assets and the amount everyone will receive. These individuals may not be the people you wish to leave an inheritance to, or you may not want them to receive the amounts prescribed by the intestacy rules.

If you name someone under the age of 18 as a beneficiary, you must also name a trustee. 

A trustee is an individual or legal entity responsible for controlling the assets. When it comes to underage beneficiaries, a trustee is required to provide legal protection since minors lack the legal capacity to manage their own financial affairs. If an underage beneficiary is named directly, they would receive the assets outright upon reaching 18, which can lead to potential mismanagement. 

A trustee also makes informed decisions about investments, distributions, and other financial matters, ensuring that the assets are managed wisely. This can be crucial in the case of retirement benefits where the amount can be substantial. 

With a trustee, funds can be tailored to meet the needs of the beneficiary. The trustee can disburse funds for specific purposes, such as education, healthcare, or living expenses, rather than providing a lump sum at a predetermined age. This can help safeguard the assets from being spent too quickly, ensuring long-term financial security for the underaged individual.

If you want to know more, consider talking to one of our Retirement Information Consultants. They will help you understand your personal situation and how this decision fits into your overall financial plan.

For more information, visit Beneficiary Before Retirement.