Halifax woman calling for more protections on RRSPs after husband's sudden death

A Halifax woman is calling for more protections on some retirement saving plans after her husband's sudden death left her and their teenage daughter faced with the prospect of losing the majority of the couple's life savings.

In August 2018, Dianne Taylor's husband, Tim Taylor, wasn't feeling well.

The 50-year-old went to the emergency room and was diagnosed with stomach cancer. By that point, it had already spread to his lungs.

He died just three weeks after his diagnosis.

In the midst of her own grief, Dianne Taylor was also trying to support her daughter, who was 13 at the time.

Little did she know there was another shock still to come.

It turned out, Tim's registered retirement savings plan — worth $685,000 — had a listed beneficiary that wasn't his wife. Despite his will, which left everything to Taylor, the bulk of their savings was designated to Tim's mother.

"Just when you feel like you have nothing left, I had to deal with a beneficiary issue," she said, noting that Tim was a banker and not someone green when it came to finances.

More protections needed, widow says

Taylor is urging others to check their listed beneficiaries for things like RRSPs and life insurance policies. But she also wants to see protections put in place similar to those under the Nova Scotia Pensions Benefits Act.

"There's definitely a gap in law. Something like this should never be able to happen," she said.

In Nova Scotia, pensions have to be registered in the province and are beholden to the Pension Benefits Act, said Derek Gerard, a consulting actuary with a specialty in pensions.

He said that under the act, if a pension plan member dies, the spouse automatically has a priority to the death benefits — even if there is another beneficiary.

"It gets overruled by the law and the spouse becomes the beneficiary in the case of death," he said.

Gerard, who was also a family friend of Tim Taylor, said it seems inconsistent that RRSPs do not have the same protections.

"When people are in a marriage or a relationship and they're partners, those assets are shared retirement assets," he said.

"For one spouse to be able to designate a huge chunk of their estate to somebody outside of the marriage, that would be pretty inconsistent with the rest of the way we treat marriage and partnerships."

Revoking clause in will didn't change designation

Taylor and her husband listed their assets, including the RRSP, when they created their will years before he fell sick. The will stated that 100 per cent of their estates would each go to the other, should one of them die.

They even included a revoking clause in the will that would override the issue should a beneficiary be forgotten.

"It was shocking to find out that that's not how it works," said Taylor.

Taylor says that when Tim first opened the RRSP — as a young man and before they were married — he listed his mother as the beneficiary.

As the years went on, she said there was no paperwork to name the beneficiary, so she believes he forgot about it.

When the issue arose after Tim's death, Taylor said she was confident that it would work out in her favour. She believed they could prove his intent to the court.

But lawyers felt otherwise.

"We took a look at whether his will would change the designation that he had left in his RRSP and we unfortunately came to the conclusion that it wouldn't fix it," said Brian Casey, counsel at BoyneClarke.

Casey said this situation isn't unique to Taylor's family. People sometimes forget they've made designations, then when life changes — a second child arrives, for example — and the beneficiary isn't updated, it can lead to an "ugly situation."

There was a similar case in Nova Scotia in 2016, Casey said, which meant there was a precedent to suggest Taylor would not be successful.

"I had a 13-year-old daughter at the time that I had to be financially responsible for, and it would have been irresponsible of me to actually fight it in court," Taylor said.

'Right now, there are no protections'

As for the clause in the will, Casey said those are often too general to change a specific designation.

"Unfortunately the message is you need to keep those things up to date."

But there was also another blow: the RRSP would not only go to the beneficiary, but the estate would then be left to pay the tax bill. In her case, that would have been 54 per cent of $685,000.

Taylor's matter was settled out of court. Because Tim had a life insurance policy, that money was used to give the after-tax value of the RRSP to the listed beneficiary. If he did not have that policy, Taylor said the issue would have "wiped out the whole estate."

"RRSPs deserve the same protections that pensions have. Both of them are retirement savings, both of them are family assets," Taylor said.

"Right now, there are no protections."

Calling for change

Taylor wants to see legislation to protect families, even starting with requiring beneficiaries to be clearly listed.

In Quebec, beneficiaries must be named through a will under provincial legislation.

A spokesperson for the Nova Scotia Department of Finance said this issue falls under federal tax code.

However a spokesperson for the Canada Revenue Agency told CBC News on Tuesday that the issue "falls under the legal framework of succession/estate law which is covered by provincial legislation."

Taylor said she has considered the possibility that the listed beneficiary was intentional, but she does not believe that is the case.

"He was so concerned about my daughter and I when he was dying. I can't even begin to imagine that he was aware and never said anything."

Gerard agrees, saying that Tim's wife and daughter were his whole world.

"He breathed every day for them. And he wanted everything for his daughter's well-being and her future to look after her," he said, adding that it is devastating Tim's daughter, now 16, was not protected.

"Anything we can do to help protect that in the future, I think would be pretty important that we could all get behind that."