In August 2018, Dianne Taylor’s husband Tim Taylor was not feeling well. The 50-year-old man went to the emergency room and was diagnosed with stomach cancer. By then it had already spread to his lungs.
He died just three weeks after his diagnosis.
Amidst her own grief, Dianne Taylor was also trying to support her then 13-year-old daughter.
She didn’t know much, there was another shock to come.
It turned out that Tim’s registered retirement savings plan – valued at $ 685,000 – had a registered beneficiary who was not his wife. Despite her will, which left everything to Taylor, most of their savings were directed to another family member.
“Just when you feel like you have nothing left, I had to deal with a payee issue,” she said, adding that Tim was a banker and not someone green in matters. of finances.
Taylor urges others to check the beneficiary list for things like RRSPs and life insurance policies. But she also wants protections similar to those in Nova Scotia’s Pensions Benefits Act to be put in place.
“There is definitely a loophole in the law. Something like this should never happen. “
Taylor and her husband listed their assets, including the RRSP, when they created their will years before he fell ill. The will stipulated that 100 percent of their estates would each go to the other, should one of them die.
They even included a revocation clause in the will that would override the issue if a beneficiary was forgotten.
“It was shocking to find out that wasn’t how it worked,” Taylor said.
Taylor believes that when Tim first opened the RRSP – as a young man and before their marriage – he listed his mother as a beneficiary.
Over the years she has said there is no paperwork to name the beneficiary, so she thinks he forgot it.
When the issue arose after Tim’s death, Taylor said she was convinced it would work in her favor. She believed they could prove her intention in court.
But the lawyers thought otherwise.
“We looked into whether his will would change the designation he left in his RRSP and unfortunately came to the conclusion that this would not solve the problem,” said Brian Casey, lawyer at BoyneClarke.
Casey said this situation was not unique to Taylor’s family. People sometimes forget that they have made designations, so when life changes – a second child arrives, for example – and the beneficiary is not updated, it can lead to a “lousy situation”.
There was a similar case in Nova Scotia in 2016, Casey said, which meant there was precedent suggesting Taylor would not be successful.
“I had a 13-year-old daughter at the time, for whom I had to be financially responsible, and it would have been irresponsible of me to fight her in court,” Taylor said.
‘At the moment there are no protections’
As for the clause in the will, Casey said these are often too general to change a specific designation.
“Unfortunately, the message is that you have to keep these things up to date. “
But there was also another blow: the RRSP would not only go to the beneficiary, but the estate would then be left to foot the tax bill. In his case, that would have represented 54%. 100 of $ 685,000.
Taylor’s case was settled out of court. Since Tim had a life insurance policy, this money was used to give the after-tax value of the RRSP to the named beneficiary. If he didn’t have this policy, Taylor said the issue would have “wiped out the whole field.”
“RRSPs deserve the same protections as pensions. Both are retirement savings, both are family assets, ”Taylor said.
“For the moment, there are no protections. “
Quebec is tackling this problem. Beneficiaries must be named by will under provincial legislation.
In Nova Scotia, pensions must be registered in the province and are subject to the Pension Benefits Act, said Derek Gerard, a consulting actuary specializing in pensions.
He said that under the law, if a member of a pension plan dies, the spouse automatically takes priority over the death benefits – even if there is another beneficiary.
“It is canceled by law and the spouse becomes the beneficiary in the event of death,” he said.
Gerard, who was also a family friend of Tim Taylor, said it seems inconsistent that RRSPs don’t offer the same protections.
“When people are married or in a couple and are partners, those assets are shared retirement assets,” he said.
“For a spouse to be able to designate a large portion of their estate to someone outside of marriage, that would be quite inconsistent with the rest of the way we treat marriage and partnerships. “
Call for change
Taylor wants to see legislation to protect families, even starting by requiring that beneficiaries be clearly listed.
A spokesperson for the Nova Scotia Department of Finance said the matter fell under the federal tax code.
The federal department has yet to respond to the CBC’s request for comment.
Taylor said she had considered the possibility that the enrolled beneficiary was intentional, but she doesn’t think so.
“He was so concerned about my daughter and I when he was dying. I can’t even imagine he knew about it and never said anything. “
Gerard agrees, saying Tim’s wife and daughter were his whole world.
“He breathed every day for them. And he wanted everything for the well-being of his daughter and her future to take care of her, ”he said, adding that this devastated Tim’s daughter, now 16, who was not. not protected.
“Anything we can do to help protect this in the future, I think it would be very important that we could all support this. “