A recent ruling shouldn’t necessarily lead clients to name their spouse as beneficiary of their registered plans automatically without considering their broader estate planning goals
Some lawyers think it’s likely the federal government will amend section 160 of the Income Tax Act to ensure that transfers to spouses by beneficiary designation are caught because the recent decision in Enns v Canada ‘creates a leak in the CRA’s tax collections ability.
Tax experts say the FCA’s ruling provides clarity as to the definition of spouse for the purposes of section 160. The CRA assessed the widow for part of the man’s debt, but she appealed the assessment to the Tax Court of Canada arguing she was no longer his spouse. The TCC, reviewing case law, found for the CRA.
Tax advisors point out that the court focused only on that part of section 160 that deals with a transfer of property by the designated beneficiary to a spouse or common-law partner, not transfers to minors or other non-arm’s length individuals.
On the other hand, designating a beneficiary can lead to unintended negative consequences, such as family conflict if heirs receive unequal amounts, for example. In addition, disgruntled heirs may dispute a beneficiary designation if the deceased did not document their intentions.
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