Sign Up


Designating a Beneficiary for an LIF

When it comes to designating a beneficiary for your Life Income Fund (LIF), you have three options.  You can choose to designate one of the following:

  • your estate
  • your spouse (or common-law partner)
  • someone other than your spouse (or common-law partner)

However, unlike designating a beneficiary for your RRSP or RRIF, designating a beneficiary for your LIF is very restrictive. The transfer of your LIF assets upon your death is often disclosed within the LIF Federal Pension Addendum that your financial institution will request you sign. The addendum discloses the guidelines for the administration of your LIF under the federal Pensions Benefits and Standards Act (PBSA).

Note: If you want to designate a beneficiary other than your surviving spouse or common-law partner, your surviving spouse/common-law partner must waive their spousal entitlement in the form and manner as set out in the PBSA.

Example: Below is a common clause contained within federal addendum outlining how your LIF is to be administered upon your death:

Death of plan holder

            “On the death of the plan holder, the Locked-In Assets in the Plan shall:

a) If the plan holder is a member or former member of the registered pension plan from which the Locked-In Assets originate and is survived by a spouse, be

 a.     applied to purchase an immediate or deferred life annuity for the plan holders spouse in accordance with paragraph 60(l) of the Income Tax Act (Canada).

 b.     Transferred to a locked-in registered retirement savings plan or to a restricted locked-in savings plan for the spouse, or,

 c.      transfer to a life income fund or to a restricted life income fund for the spouse; or

b)  If, as of the plan holder's date of death, there is no spouse entitled pursuant to paragraph 18(a), be;

 a.    paid to the plan kolder's designated beneficiary in accordance with the Plan, or,

 b.    if no beneficiary has been designated in accordance with the plan, paid to the plan holder's estate.”

 

The following figure illustrates your options when designating a beneficiary for an LIF:

 

 

The following section outlines the options for designating your beneficiary for an LIF:

Designating my spouse or common-law partner as the beneficiary of my LIF

When you designate your spouse as the beneficiary of your RRSP, your spouse will have four options available to them:

  • Transfer the funds to another Locked-In Retirement Savings Plan (LRSP).
  • Transfer the funds to a registered pension plan, if the registered pension plan permits such a transfer and if the plan administers the benefit attributed to the transferred funds as if the benefit were that of a plan member with two years membership in the plan.
  • Use the funds to purchase an immediate or a deferred life annuity in accordance with subsection 60(l) of the Income Tax Act, or
  • Transfer the funds to a Life Income Fund (LIF).

Note: Your LIF assets will not be included in your estate and, therefore, not included in the calculation of your estate’s Probate Fees.

Designating my estate as the beneficiary of my LIF where no surviving spouse or spouse waives their entitlement

By designating your estate as your beneficiary upon your death, your LIF assets become part of your estate and their distribution is guided by the instructions in your will. Having your LIF assets distributed through your estate may be desirable for various estate planning reasons including the following:

  • You have beneficiaries that are minors.
  • You have beneficiaries that are physically or mentally dependant and require assistance in managing their finances.
  • Your will creates Inter-vivos Trusts that need to be funded with your LIF assets.
  • Your estate will need liquid assets to help pay the income tax owing as a result of your death.
  • Your estate will require liquid funds to pay cash bequests you have made through your will.

Note: There may be additional estate planning reasons for designating your estate as the beneficiary of your LIF.

When you designate your estate as the beneficiary of your LIF assets, your LIF investments become an asset within your estate and as such these assets will add to your estate’s Probate Fees payable. Each provincial government publishes a Probate Fee schedule and the fees vary by province.

Designating a person other than my spouse as the beneficiary of my LIF where no surviving spouse or spouse waives their entitlement

When you designate someone other than your spouse as the beneficiary of your LIF, your LIF investments will transfer automatically upon your death to that person. Your LIF investments are withdrawn from your LIF and transferred into the name of your beneficiary as non-registered investments. Your beneficiary receives and holds the transferred investments in a taxable environment. The LIF assets cannot be transferred into your beneficiary’s registered account.

Your estate must include the value of your LIF assets in your Date of Death Income Tax Return and your estate is responsible for any resulting income tax payable.

The financial institution that administers your LIF will transfer your LIF assets to the designated beneficiary and issue an Income Tax Information slip, for the dollar value of your LIF, as at the date of death, which your estate’s legal representative will include in your Date of Death Taxable Income. 

Because your LIF assets are withdrawn and transferred directly to your designated beneficiary, they are not included as an asset of your estate and no Probate Fees are paid.

Designating more than one beneficiary of your LIF where there is no surviving spouse

Most financial institutions permit you to designate more than one individual as the beneficiaries of your LIF assets. For example, if you want to name your four children as the beneficiary of your LIF assets, the financial institution that administers your LIF should have a form that enables you to designate your four children as the beneficiaries. You can designate that each of the four children are to receive equal shares or 25% each or you can vary the percentage each beneficiary is to receive, as long as the total percentages equal 100%.   

Note: Check with your financial institution to see if they permit multiple beneficiaries be designated. If the financial institution administering your registered account does not permit multiple designations in their registered account documentation and designating multiple beneficiaries is important for the success of your estate plan, you can still make the multiple designation through your will. This is accomplished by designating your estate as the beneficiary in the account’s documentation and then including a designation of multiple beneficiaries in your will.

Back To Top

Quick Navigation



  1. How to Get Started:

    Classroom:

  2. Videos:

    Financial Planning & Budget:

  3. Tools & Calculators:

    Other Resources: