Your pension not only provides you with post-retirement income, but it also provides financial security for your loved ones after your death. As a pension contributor, it is important to understand your legal entitlements when designating pension benefits.
Do Pension Benefits Form Part of My Estate?
If a beneficiary designation has been made through a pension plan, the benefits do not form part of one’s estate. This is beneficial because the pension funds will not be subject to probate and will not be used by the executor to pay any debts or liabilities.
Who Can I Designate as My Beneficiary?
The default under BC law is that a spouse is deemed to be the sole beneficiary of a deceased contributor, unless:
- the deceased contributor does not have a spouse at the time of death; or
- the spouse signs a waiver withdrawing their entitlement to the pension benefits.
Every pension plan is different, and it is important to confirm your entitlement to name alternate beneficiaries with your pension plan administrator. However, if a spouse waives their entitlement, the benefits may be paid to other listed beneficiaries (e.g., children). If there are no listed beneficiaries, the benefits may be paid to the personal representative (e.g., executor) of a deceased contributor’s estate.
What is the Definition of a Spouse?
Under BC law, two people become spouses if they:
- are legally married to each other; or
- have not been living separate and apart from each other and are living in a “marriage like” relationship for a period of at least 2 years.
Two people cease being spouses if:
- they become divorced; or
- in the case of a “marriage like” relationship, one or both people terminate the relationship.
In circumstances where a common law spouse is claiming entitlement under the deceased contributor’s pension, the common law spouse must provide proof that the relationship was “marriage like” in nature. Such evidence must be provided in satisfaction to the administrator of the pension plan. The courts have taken a broad approach on what can be considered a marriage like relationship and have suggested that evidence of such a relationship should be both subjective and objective. Evidence may include but not be limited to, proof of joint finances, joint ownership of property, or whether the couple conducted themselves as a married couple in social and public settings.
How Can a Spouse Waive Entitlement to a Pension?
If a spouse is willing to give up their entitlement to a contributor’s pension, the spouse wanting to waive entitlement must sign a waiver in accordance with section 80(4) of the PBSA. The waiver must not have been signed more than 90 days before the commencement date of the pension plan, and must be signed freely, voluntarily, absent any duress and the spouse must understand the legal consequences of waiving such entitlement. If there remains evidence of duress, or evidence of a spouse not understanding the legal consequences of signing the waiver, the validity of the waiver may be challenged and found invalid.
How to Name My Children as Beneficiaries?
As mentioned, you may name your children as beneficiaries if you do not have a spouse, your spouse predeceases you, or your spouse has waived their entitlement. However, if any of your children are under the age of majority it is advised to consult with an experienced lawyer to discuss options of creating and naming a trust as your beneficiary to have a trustee distribute and manage your pension benefits on behalf of your minor children.
The legislative restrictions imposed on pension benefits can often be difficult to understand or may even be overlooked by many pension contributors. Designating beneficiaries and providing financial security for your children requires special thought and planning to ensure your wishes are fulfilled while adhering to the legislative restrictions. If you are a pension contributor and have not designated a beneficiary or would like to designate your children as beneficiaries, contact your pension administrator who will guide you through the process.
If you have questions about designating your pension benefits, our team can help you consider your options, and create a strategy that is right for you. Contact our Wills & Estate Team – we’re here to help.