Does a Named Beneficiary Automatically Inherit your TFSA, RRSP, RRIF or FHSA? Not Always in BC
Many people assume that naming a beneficiary on a benefit plan, such as a Tax-Free Savings
Account (TFSA), Registered Retirement Savings Plan (RRSP), Registered Retirement Income
Fund (RRIF), or First Home Savings Account (FHSA), guarantees that the funds will pass
directly to that person upon death.
It seems straightforward. However, in British Columbia, it is not quite that simple.
In British Columbia, the law surrounding beneficiary designations is more complicated than
most people, and even some advisors, realize. A long-standing legal doctrine called the
presumption of resulting trust can sometimes override a named beneficiary, meaning the funds
may end up back in the estate instead of going to the intended recipient.
What Is the Presumption of Resulting Trust?
The presumption of resulting trust arises where someone transfers property to another person,
other than a spouse, in exchange for nothing and without clearly demonstrating the intention to
gift the property to the recipient. If the person’s intention is unclear, the law presumes that the
recipient is merely holding the property in trust for the original owner.
The doctrine appears most frequently in estate disputes involving joint bank accounts or jointly
held real estate between parents and children. If the child cannot prove that the parent intended
them to keep the asset after the parent’s death, then the property will be treated as being held in
trust for the estate.
How the Presumption Applies to Beneficiary Designations
Across Canada, courts have disagreed on whether the presumption of resulting trust applies to
registered accounts with designated beneficiaries. In Manitoba, the presumption applies to
benefit plans with designated beneficiaries, 1 whereas in Saskatchewan, it does not. 2 In British
Columbia, the courts have consistently held that the presumption does apply in these
circumstances.
FHSA, the law presumes that the beneficiary holds the money in trust for your estate, unless they as a result, in British Columbia, if you designate a beneficiary on a TFSA, RRSP, RRIF, or can prove that you intended the funds as a gift. If there is no evidence of intention at the time of the designation, the money will likely be held in trust for the estate.
The Unresolved Question: Section 95 of WESA
British Columbia courts have yet to resolve a major issue: section 95 of the Wills, Estates and
Succession Act, which states that a benefit payable to a designated beneficiary under a benefit
plan does not form part of the account holder’s estate. While this may appear definitive, the
courts have not squarely addressed how this section affects the presumption of resulting trust.
Several cases have noted the potential impact of the section but have declined to decide the issue
because they were able to decide the case on other grounds.
Ramifications and Practical Implications
Since a designated beneficiary may still need to prove that the account was a gift, account
holders should ensure that their intentions are clearly documented at the time the beneficiary is
designated.
Courts may look for written notes, conversations witnessed by others, the consistency of the
overall estate plan, and instructions given to financial advisors. Without evidence, the
presumption can be hard to rebut.
If you intend for the account to transfer to the designated beneficiary upon your passing, you
should make your intention clear, which may include:
- Putting your intention in writing
- Communicating your wishes to your executor, estate planner, and family
- Ensuring your overall estate plan is consistent
Until the courts clarify how section 95 affects the current analysis, you should not solely rely on
the designation form provided by your financial institution. Taking proactive steps now can help
ensure that your intentions are honoured later.
1 Dreger (Litigation Guardian of) v Dreger, 1994 CanLII 16643 (MBCA).
2 Nelson v Little Estate, 2005 SKCA 120.
3 Neufeld v Neufeld, 2004 BCSC 25; Stade Estate (Re), 2017 BCSC 2354; Williams v Williams Estate, 2018 BCSC
711; Simard v Simard Estate, 2021 BCSC 1836; Chappell v Chappell, 2024 BCSC 268.