How many beneficiaries can you have?

Updated July 25, 2016 with response from RBC.

A reader asked, “Is there is a maximum number of beneficiaries allowed? My mother-in-law’s financial institution told her there is a max of five. But she has seven children and wants them all listed on her accounts, including her TFSA.”

Frank Di Pietro, assistant vice-president of tax and estate planning at Mackenzie Investments, tells us the Income Tax Act does not restrict the number of beneficiaries on an account. So, any maximum would depend on the financial institution’s own policies.

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We asked the Big 5 banks what their policies were. Three got back to us, and we’ll update as needed.

• Bank of Nova Scotia: No maximum. “As a general principle, brokerage clients are entitled to designate multiple beneficiaries for their registered accounts,” says Mark Phillips, managing director, Operations & Product Strategy, Scotia iTRADE. “While most financial institutions and investment firms will typically provide only a few spaces to designate beneficiaries on their forms, clients are generally entitled to designate more beneficiaries, if desired.” He also notes, “Beneficiary designations/successor holders are only assigned to registered accounts. Non-registered accounts are usually disbursed according to the type of account or to the estate of the account holder.”
• CIBC: No legal maximum. “There is no legislated limit on the number of beneficiaries you can name on a registered plan,” a CIBC spokesperson tells us. “However, there may be systematic or contractual limitations, which is why it is important [for clients] to inquire with [their] advisor regarding the specifics of each particular plan.”
• RBC: No maximum; “however, plan owners should consider the risk and complexity of the estate settlement when the plan proceeds are split multiple ways and the difficulty in locating all the beneficiaries,” says David Birkbeck, director, Registered Plans, RBC Royal Bank. He notes that beneficiaries are permitted for RRSPs, TFSAs, RRIFs and DPSPs (Deferred Profit Sharing Plans), but not RESPs or RDSPs. And, he reminds us, beneficiary designations are not permitted on accounts held in Quebec.
• TD: No maximum. “The key is to ensure the beneficiary designation(s) adds to 100%,” says Cynthia Caskey, vice-president and portfolio manager with TD Wealth Private Investment Advice.

If your client is told there’s a maximum, ask for confirmation from a senior institution member.

Tips for designating beneficiaries

For registered accounts, Caskey tells clients about the concepts of successor annuitants (RRIFs) and successor holders (TFSAs). A successor, who can only be a spouse or common-law partner, becomes the new account holder and acquires all rights that the original account holder had.

“For example, it is superior to be a successor holder for TFSA for a spouse, and our best advice is that a spouse be named a successor holder rather than a beneficiary of the TFSA,” says Caskey.‎ That’s because after the accountholder dies, ownership can pass to the successor and the TFSA can continue sheltering income without eating up the successor holder’s contribution room.

Estate planning: A guide to protecting your legacy

As for RRIFs, “Successor annuitant for RRSPs and RRIFs should be carefully considered with a lens on flexibility and age differences — and we do see beneficiary status chosen for a spouse,” she says.

She points out that clients can also name contingent beneficiaries for registered accounts. “This may be considered in case of the unexpected, such as an accident which claims the lives of both the account holder and his/her beneficiary. Contingent beneficiary designation process requires additional care about which beneficiary is contingent‎, especially when there are multiple beneficiaries and multiple contingent beneficiaries.”

This article was originally published on Advisor.ca