Monday, November 22, 2004
RRSPs protected from creditors
A recent decision of the Court of Appeal for Ontario is important to those who wish to plan their estates and especially to those who may have substantial debt and numerous creditors on and prior to their death. In a case known as Amherst Crane Rentals, v. Perring, - the Plaintiff and appellant was a creditor of the estate of the deceased. The respondent was the widow of the deceased. Before his death, the deceased had named his wife as the designated beneficiary of his two RRSPs. On his death, she received the full value of the two funds.
The Respondent was owed a substantial sum by the deceased and sought to attach the RRSP proceeds, in payment of its claim.
At trial, Justice Cameron found that the RRSPs did not form part of the estate and as a result the funds were not available to creditors. He found that the funds devolved directly to the named beneficiary of the funds. Indeed, the funds, in this particular fact situation, do not flow through the estate but are paid directly to the named beneficiary.
The Court of Appeal was in agreement with Justice Cameron. In their unanimous ruling, the Court found that Section 53 of the Succession Law Reform Act was drafted very similarly to the wording in Section 161(1) of the Insurance Act. The latter section had been dealt with by the Supreme court of Canada in a case known as Kerslake v. Gray. In that decision, the Supreme Court of Canada had held (in 1957) that a Personal Representative had no claim against insurance proceeds where there was a named beneficiary of the insurance proceeds, other than the estate. Since that decision had not been overruled since it was decided, the Court of Appeal felt compelled to give section 53 of the Succession Law Reform Act similar interpretation.
As a result, subject only to a successful appeal to the Supreme Court of Canada, where you have named a beneficiary to your RRSPs and you die, your creditors can not compel payment from the beneficiary.
This finding will be useful to estate planners with respect to planning for bankrupt estates or planning to protect assets in an RRSP. This is especially important since RRSP funds may be one of, if not the largest assets, in a person's estate.
The Respondent was owed a substantial sum by the deceased and sought to attach the RRSP proceeds, in payment of its claim.
At trial, Justice Cameron found that the RRSPs did not form part of the estate and as a result the funds were not available to creditors. He found that the funds devolved directly to the named beneficiary of the funds. Indeed, the funds, in this particular fact situation, do not flow through the estate but are paid directly to the named beneficiary.
The Court of Appeal was in agreement with Justice Cameron. In their unanimous ruling, the Court found that Section 53 of the Succession Law Reform Act was drafted very similarly to the wording in Section 161(1) of the Insurance Act. The latter section had been dealt with by the Supreme court of Canada in a case known as Kerslake v. Gray. In that decision, the Supreme Court of Canada had held (in 1957) that a Personal Representative had no claim against insurance proceeds where there was a named beneficiary of the insurance proceeds, other than the estate. Since that decision had not been overruled since it was decided, the Court of Appeal felt compelled to give section 53 of the Succession Law Reform Act similar interpretation.
As a result, subject only to a successful appeal to the Supreme Court of Canada, where you have named a beneficiary to your RRSPs and you die, your creditors can not compel payment from the beneficiary.
This finding will be useful to estate planners with respect to planning for bankrupt estates or planning to protect assets in an RRSP. This is especially important since RRSP funds may be one of, if not the largest assets, in a person's estate.
posted by Robert at 3:46 PM
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