When Beneficiary Designations Override Your Will

A common Canadian estate planning error — assuming the Will controls everything. It doesn't. Designated beneficiaries on registered accounts, life insurance, and pension typically pass directly to those beneficiaries outside the Will.

What the Will controls #

The Will controls:

• Bank accounts (chequing, savings, GICs without joint ownership)
• Investment accounts WITHOUT designated beneficiary (non-registered)
• Real estate (with caveats for joint ownership)
• Personal property (vehicles, jewellery, collectibles, etc.)
• The residue of the estate

What the Will does NOT control #

These pass directly to designated beneficiary, outside the Will, outside probate:

• RRSP and RRIF with designated beneficiary
• TFSA with successor holder (spouse) or designated beneficiary
• Life insurance with designated beneficiary
• Pension plan with designated beneficiary (limits apply)
• Joint accounts with right of survivorship (pass to surviving joint holder)

The common error #

Estate has:

• $100,000 RRSP designated to ex-spouse from years ago
• Will saying "everything to current spouse"

Outcome: Ex-spouse gets the $100,000 RRSP. Will provision has no effect on the RRSP.

This pattern is extremely common — Canadian estates regularly have outdated designations contradicting current Will intent.

Why designations override #

Statutory and contractual:

• Insurance Act provincial provisions
• Pension Benefits Act provincial provisions
• Income Tax Act provisions for registered accounts
• Specific contractual provisions in each account

The designation creates a direct contractual or statutory entitlement to the beneficiary. The Will, as a separate instrument, generally cannot override.

Exceptions and limits:

• Specific provincial law variations
• Some courts have considered specific cases involving recent designations vs. older Wills
• Specific to circumstances; not reliable as general principle

Practical: Don't rely on Will to override; ensure designations align with intent.

Tax efficiency — spousal rollover #

RRSP/RRIF spousal rollover:^[1]

• Spouse designated as beneficiary: RRSP rolls over to spouse's RRSP tax-deferred. No immediate tax.
• Spouse via Will (no designation): the default is that the RRSP value lands on the deceased's final return, taxed at the applicable marginal rate (often 30-50%+), with the estate distributing the net amount. A rollover may still be available where the spouse inherits through the estate, via a joint election between the estate and the spouse — but it adds paperwork, and the funds typically remain exposed to probate.

For a $100,000 RRSP, a direct spousal designation can defer $30,000-50,000+ in immediate tax.

Why this matters: Designated spouse beneficiary is significantly more tax-efficient. Specific designation should be intentional.

TFSA — successor holder vs designated beneficiary #

Successor holder (spouse only):

• TFSA continues intact to spouse
• No tax
• TFSA contribution room preserved
• Specific to spouse only

Designated beneficiary (non-spouse or no successor holder):

• TFSA value distributed to beneficiary
• TFSA characteristics lost (no longer tax-free growth)
• Beneficiary receives the cash

Best practice: Spouse as successor holder where applicable.

Common designations to review #

Registered accounts:

• RRSP — primary and contingent beneficiary
• RRIF — primary and contingent beneficiary
• TFSA — successor holder (spouse) or designated beneficiary
• LIRA/LIF — primary beneficiary (often spouse required by pension law)
• DPSP — primary beneficiary

Insurance:

• Individual life insurance — primary and contingent
• Group life insurance through employer — primary
• Mortgage life insurance — typically beneficiary is mortgage holder
• Travel insurance — typically estate

Pension:

• Defined benefit pension survivor benefits — spouse typically primary by statute
• Defined contribution pension — primary beneficiary
• CPP survivor pension — spouse automatically (no designation)

When to review designations #

At minimum annually.

Definitely after:

• Marriage
• Divorce or separation (in Canada's common-law provinces, existing designations generally remain in force until you change them — an ex-spouse can stay entitled to a plan or policy unless you update the designation)
• Common-law partnership formation or breakdown
• Death of designated beneficiary
• Birth of child
• Family conflict that changes intent
• Significant relationship change

Coordinating with the Will #

Best practice — alignment:

Will leaves residue to spouse, then to children. Designations on RRSP, TFSA, life insurance — spouse primary, children contingent.

Coordinated approach reduces confusion and provides consistent treatment.

Specific situations — intentional misalignment:

Will leaves residue to children equally. Life insurance designated to spouse (tax-efficient; spouse gets specific support).

This is intentional — different assets to different beneficiaries serves specific goals. Document the reasoning.

How to update designations #

For each account/policy:

• Login to institution online or contact directly
• Update designation form
• Confirm change (paper or electronic confirmation)
• Keep record

Specific institutions:

• Banks (each one)
• Investment firms (each one)
• Insurance companies (each policy)
• Pension administrators (each plan)
• Employer HR (group benefits)

Note — institutional websites typically allow online beneficiary updates for most accounts; some require paper forms.

What to avoid #

Assuming the Will controls everything. Common error.

Outdated designations. Ex-spouses, deceased relatives, no-longer-trusted persons still designated.

No contingent beneficiary. Primary dies; account passes to estate per default rule. Always name contingent.

Designations conflicting with Will intent. Unless intentional, they create confusion and potential family conflict.

Forgetting smaller accounts. Group life insurance, smaller insurance policies, pensions — all have designations needing review.

What we focus on at It's Simple Will #

The Will Creator produces the Will document. Beneficiary designation review is a separate task — the Life Discovery Kit (post-payment) includes prompts to identify all designations and ensure they align with Will intent.

Related guides #

• How to update beneficiary designations
• How life insurance passes at death in Canada
• Principal residence exemption at death
• Spousal rollover at death