Your will enables you to determine the beneficiaries of the
property in your estate. It is important to understand, however,
that some property will be handled outside of your estate, which is
to say that it will not necessarily be governed by the terms of
your will. Therefore, it is crucial that those types of property
are carefully considered when preparing your estate plan.
Property Held Jointly With Another Person
One asset that will pass outside of your estate is any property
that you hold jointly with another person. There are two types of
property ownership of real estate. The first, and most common, is
"joint tenancy". This type of ownership means that the
co-owners do not own a specified share of the property, and when
the first co-owner dies, the surviving co-owner will become the
sole owner of the property through the operation of a the legal
principle of survivorship. The surviving owner will be able to
transfer the title to the property into their own name without the
necessity of a grant of probate, and so property held in this
manner will pass outside of the estate.
The second type of property ownership is "tenancy in
common". If you own a specified share or percentage of a piece
of real estate, then the principle of survivorship will not apply,
and the share of the property owned by the deceased will be dealt
with as part of the deceased's estate.
The issue of joint property can give rise to a wide range of
contentious issues when an estate needs to be administered. It is
important to get legal advice about this type of property, ideally
at the time that it is acquired or placed into joint names, so that
all of the parties understand the nature and effect of the joint
RRSPs and RRIFs
RRSPs and RRIFs are another type of asset that will commonly
pass outside of one's estate. Most people find that their
estate would enjoy a significant tax saving if they designate a
beneficiary, other than their estate, on their RRSPs or RRIFs. If
the designated beneficiary is a spouse or common law partner, or a
child or grandchild who was financially dependent on the deceased,
then the deceased's RRSP or RRIF can be rolled over to the
beneficiary's RRSP, RRIF or Registered Disability Savings Plan
(RDSP) on a tax-deferred basis. If you name a beneficiary on those
investments, you do not need to deal with them in your will unless
you want to make a change to the designated beneficiary.
Life insurance proceeds will also often pass outside of the
deceased's estate if a beneficiary other than the estate is
named on the insurance policy. There are a number of reasons for
which it will usually be recommended that a beneficiary be named on
the insurance policy. First of all, if the life insurance proceeds
do not pass through the estate, then they will not be available to
creditors of the estate. The proceeds can also be paid out to the
beneficiary relatively quickly, since no grant of probate is
The most important point to keep in mind with the above-noted
types of property is to ensure that the beneficiary designations on
all of your RRSPs, RRIFs and life insurance policies are kept up to
date at all times. There are numerous situations where an ex-spouse
or a parent remains the designated beneficiary of a policy, when
that was likely not the intention of the deceased. There is often
no remedy for a loved one who is surprised to find out that they
are not the beneficiary of a valuable life insurance policy or
It is usually very easy to change the beneficiary designations,
either on the instrument itself or through your will, so it is
important to review this part of your estate plan to ensure that
your documents reflect your current intentions.
As with all legal matters, additional complexities can arise
depending on the facts in each unique situation. It is important to
have a trusted legal advisor assist you with your estate plan in
order to ensure that your intentions are realized for any property
passing outside of your estate.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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