Estate Planning and Pension Considerations

A little more than a quarter of all adults in British Columbia and nearly 40% of paid workers nationwide are members of a registered pension plan. As such, there is a reasonable likelihood that pension issues will arise in an estate file. Exploring a client’s potential pension entitlements during the estate planning process offers significant advantages. A careful review can help identify benefits that might otherwise be overlooked, ensuring that loved ones receive everything they are entitled to and making the transition smoother.

Workers today move between jobs far more often than a generation ago, and sometimes their pensions do not move with them. It’s not uncommon for pension plans to lose contact with former members who have unclaimed benefits waiting for them. Plans regularly have to track down missing members in an effort to pay benefits to the right people. These benefits may be owed to the members themselves or, when the members pass away, to their beneficiaries or estates.

Estates lawyers have an opportunity to remind their clients about these benefits and help them avoid common complexities that arise in the pension context after a member dies.

First, get the money. By reconnecting with pension plan administrators, members remain aware of their entitlements at retirement and when they pass. It allows the administrators to maintain accurate contact information and simplifies the path to payment. Estate lawyers can assist by canvassing whether a client has a pension (or pensions) from prior employment and encouraging clients to contact plan administrators.

Second, keep it fresh. Keeping beneficiary designations up to date allows benefits to pass directly to the right people when the member dies. Common issues that delay the payment of death benefits include:

• Disputes over the identity of a member’s spouse
• Where a beneficiary is a minor, but no trustee has been named
• Where the beneficiary has died, and no new designation has been made

Third, get and keep your tackle in order. It is not uncommon to have more than one representative step forward in the absence of a will. From a pension administrator’s perspective, a valid will simplifies dealing with the estate. An administrator will lean on the authority of the executor as described in the will. The will may also obviate some of the complexity around beneficiaries. Where a beneficiary is named in a will with respect to a particular pension plan, it is a valid designation.

Where uncertainties remain with respect to a member’s estate, pension administrators may require court orders before releasing benefits. Increased cost and complexity are unwelcome in general, but particularly so after the loss of a loved one. A fulsome review of a client’s pension entitlements can add significant value. It may uncover extra benefits that their loved ones are not aware of, and it makes the whole process of accessing those benefits much simpler and less stressful for everyone involved.