When naming a beneficiary for a registered plan, it’s common to simply designate a spouse or adult child, without giving the matter further thought. This might end up being the best choice, but not always.

Here’s a look at options to consider, depending on your personal situation.

Note that beneficiary designations can be indicated on the plan form. However, in Quebec, legatee (beneficiary) designations can only be made on the plan form when the investment vehicle is an insurance product, such as segregated funds or an insurance provider’s guaranteed investments. Otherwise, the legatee of the registered plan assets is to be named in the will.

RRSPs and RRIFs

When possible, the spouse is typically named the beneficiary of a Registered Retirement Savings Plan (RRSP) or the beneficiary or successor annuitant¹ of a Registered Retirement Income Fund (RRIF). Assets can simply roll over tax-deferred to the spouse’s RRSP or RRIF.

However, there are exceptions to the common choice of spouse.

In a blended family. If you’re in a blended family and have an estate plan providing for your current spouse and children from a prior marriage, you might name your children as beneficiaries of your RRSP or RRIF.

When you’re single. The tax-deferred rollover is not an option if you’re divorced, widowed or single. If you name a child or children as beneficiaries, they receive the RRSP or RRIF assets tax-free, and your estate pays the tax liability. Another option is to name the estate as beneficiary, providing instructions in your will for the RRSP or RRIF assets. For example, assets may fund a trust or help offset taxes owed by the estate.

Choosing a charity. If you name a charity as the beneficiary of your RRSP or RRIF, the resulting donation tax credit can offset the tax on RRSP or RRIF assets that would otherwise have been payable to the Canada Revenue Agency (CRA).

TFSAs

Designating your spouse. You can name your spouse as either a Tax-Free Savings Account (TFSA) beneficiary or successor holder.¹ Either way, the transferred assets do not affect your spouse’s TFSA contribution room.

Naming an adult child. A child receives the TFSA proceeds tax-free. They can contribute the funds to their own TFSA if they have contribution room.

Choosing a third party. You may want to designate a relative or friend as the beneficiary if you don’t have children or for other reasons.

Covering tax liabilities. You can name your estate as the beneficiary and have the TFSA assets help cover taxes owed by the estate.

Making a donation. If you name a charity as the beneficiary, your estate can claim the charitable donation tax credit.

¹ In Quebec, you can only designate a successor annuitant for a RRIF or a successor holder for a TFSA if the plan is funded through an insurance product.