can make life easier and less costly to your heirs. Most of us need to consider many more things regarding passing along our estates but can still benefit from doing a bit of estate plan- ning – and a large part of our estate is typically held in our reg- istered investments. Anyone with a registered account (RSP, LIRA, RIF, LIF, TFSA) who is married and has children or another individual named in their will, needs to consider naming them as primary and/or secondary beneficiaries vs. including “estate” as a ben- eficiary. When your estate is named as a beneficiary, those assets are subject to probate fees, now called estate admin- istration tax. I say “consider” because this may not be ideal in all situations – especially if any of the beneficiaries or trustees do not get along or where potential conflicts exist as can occur in blended families. If any of the latter situation exist consult a competent estate lawyer – you will be saving your heirs a great deal of pain and frustration. All registered investment accounts (and pensions) have the option of naming a primary beneficiary and secondary bene- ficiary who would receive the funds directly after death of the owner. The primary advantage of naming an individual is that the funds are not held up, tax and/or probate fees can be avoided. Probate is a court process that primarily ensures the valid- ity of a will and confirms the authority of the estate trustee or executor to administer an estate’s asset distribution as indi- cated by the will. If a will requires probate, the value of all as- sets in the estate must be documented, the probate fees calculated and submitted with documents filed (typically by a lawyer) with the estate’s court. The assets are held and typi- cally cannot be withdrawn until the probate certificate has been issued by the court. A will must be probated if the de- ceased individual was the sole owner of the assets or was an owner of a portion of an asset as a tenant in common (such as can be with real estate) or if required by anyone or an insti- tution holding assets registered for that individual. Registered assets can be quite significant, especially when one is close to retirement. Registered assets of $500,000 to $750,000 if left to an estate would be subject to probate fees of $7,000 to $11,000. And they will be held in limbo until the probate certificate has been issued by the court. Leaving as- sets directly to an individual avoids probate and simplifies the process – but care must be taken as not all situations are right for this strategy. A surviving spouse should (in most cases) be named as the primary beneficiary of all registered accounts. This allows the surviving spouse to roll the registered account assets (in- cluding TFSAs) into her/his registered assets tax and probate free. However, the secondary beneficiary is often by default the estate and it is here where children or other individuals can be named to ensure assets flow directly to them. When naming anyone other than the spouse as primary or secondary beneficiary, all of the assets in the account go di- rectly to those beneficiaries. Note that no tax is deducted, nor is probate charged. This can create a problem if there are in- sufficient assets in the remaining estate to pay the tax that will be assessed on the registered assets. At death the market value of all registered assets are taken into income and con- sidered taxable in the year of death. For someone who died having earned taxable income of $75,000 to date of death with $500,000 market value of RSPs, this means their final tax return would show taxable income of $575,000. Currently that would result in $247,581 owing in income taxes. If there are insufficient funds available in the estate, CRA will go after the trustee and beneficiaries to pay the tax. Another strategy for young couples with children under 18 that is possible is to name their children as primary or sec- ondary beneficiaries of their registered assets. If both spouses pass away, the children receive these funds in trust tax free for their care. Couples who want to avoid probate and tax on the funds or want the surviving spouse to have some funds to help care for the children could name their children as partial beneficiaries on registered accounts and flow tax free funds to trust accounts in the children’s name. There can be complications with this strategy if the office of the chil- dren’s lawyer is involved because they may limit access to the funds and require the funds to be held in trust until age 18 when the funds must be paid to the children. Working with a competent estate lawyer and financial planner will help mini- mize the complications and risks. Registered investment accounts can be an effective tool to minimize estate administration costs – they can also cause pain, frustration and delays if not used properly. Consulting an estate lawyer and/or competent financial planner is recom- mended in all but the simplest of family situations. Thanks to Donna Neff, my estate lawyer, for her help. Richard Yasinski is an independent financial planner with his own firm, Financially Sound Inc., in practice in Ottawa since 1996. He can be reached by email at ryasinski@financiallysound.ca or by phone at (613) 271-9994 ext. 101. OVER $1,000,000,000 600 - 1000 Centre St. N Calgary, AB Main 403.296.2400 Toll Free 1.800.565.8132 rogersinsurance.ca The Canadian Design and Construction Report — March 2016 – 13