Keep beneficiary designations updated

Have you checked your beneficiary designations lately? If not, you may find that your designated beneficiary is not who or what you think it should be, especially if you have divorced, remarried or had children since your last review. While many of us ensure that important documents such as wills are updated on a frequent basis, we tend to neglect our registered account and life insurance polices.

It seems that every couple of years a court decision is released that serves to remind us of the importance of regularly reviewing beneficiary designations to ensure they properly reflect our wishes. There have been numerous cases of individuals who have divorced and remarried but who have neglected to update their beneficiary designations accordingly. This can be quite frustrating for their survivors who must battle in court for a legal determination of the true beneficiary. The courts decision, however, may not necessarily be what the deceased would have wanted.

Few people expect to die at the same time as their spouse and they name each other as their designated beneficiaries. In the case of simultaneous death, a determination needs to be made about which spouse died first, even though both deaths occurred at the same time. This determination may be critical, especially if there are children from a previous marriage: will all the children be included? Or will children from a previous marriage be excluded? Proper documentation designation contingent beneficiaries for normal and extenuating circumstances will ensure that registered assets and insurance proceeds are directed towards your intended beneficiaries.

A similar dilemma arises if children are named as beneficiaries but documentation has not been updated to included those who were born after the initial designation

Another common occurrence is for a parent to make a beneficiary designation to a minor that simply uses the words “in trust for” on the application. This could mean no formal written trust agreement exists or that an agreement does exist but is not cited in the designation. These types of designations have implications that are often not thought of at the time of making the designation.

One of the disadvantages of an “In Trust For” arrangement is the inability to encroach on capital by the trustee for the benefit of the minor, which could leave the minor at risk.

To prevent these situations, it is crucial that you conduct a regular review of your beneficiary designations with a professional advisor or even immediately after you experience a change in family status to ensure they reflect your intentions.

Judy Poole is a financial advisor with Raymond James, and has spent the last 38 years involved in the financial industry. You can reach her at judy.poole@raymondjames.ca or visit her website at www.raymondjames.ca/judypoole. This article is provided as a general source of information and should not be considered personal investment advice. The views expressed are those of the author and not necessarily those of Raymond James Ltd. Securities-related products and services are offered through Raymond James Ltd., member CIPF. Financial planning and insurance products and services are offered through Raymond James Financial Planning Ltd., which is not a member of CIPF.

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