Beneficiary Designation

A beneficiary designation is the person (or people) you name to receive the assets in a specific account when you die. Most registered accounts in Canada, including TFSAs, RRSPs, RRIFs, and RESPs, allow you to name a beneficiary directly on the account.

Why it matters

When you name a beneficiary on an account, the assets in that account pass directly to them without going through your will or the probate process. This is faster, simpler, and in some provinces, avoids probate fees entirely.

If you don’t name a beneficiary, the account becomes part of your estate. That means it goes through probate, which can take months and may cost your estate a percentage of its value in fees (depending on the province).

Successor holder vs. beneficiary

For TFSAs and RRIFs, there’s an important distinction. A successor holder (available for a spouse or common-law partner) inherits the account itself. It becomes their account, and the tax-sheltered status continues. A beneficiary receives the value of the account, but the account is closed. If the beneficiary isn’t a spouse, the full value of an RRSP or RRIF is typically added to the deceased’s final tax return as income.

Keeping it up to date

Beneficiary designations override your will in most provinces. If you named an ex-spouse as your RRSP beneficiary years ago and never updated it, the account goes to them regardless of what your will says. It’s worth reviewing your designations whenever your life circumstances change.

Example

Say you have a $150,000 RRSP and you name your spouse as the beneficiary. When you pass away, the full $150,000 can roll directly into your spouse’s RRSP with no immediate tax owing. If you hadn’t named a beneficiary, that $150,000 would be added to your final tax return as income. In a province like Ontario, that could mean over $50,000 in taxes, plus probate fees of roughly $2,250 on that amount.