Proposed Legislation Would Allow For Certain Beneficiary Designations By Substitute Decision Makers

This blog was prepared with the assistance of Jessica Hoskins, summer law student.

On June 11, 2020, the Alberta Legislature introduced Bill 22 which proposes to amend section 71 of the Wills and Succession Act.

The amendments will allow substitute decision makers such as attorneys and trustees to carry over existing beneficiary designations under renewed, replaced or converted plans.

Current status of the Wills and Succession Act

Beneficiary designations are a straightforward and relatively inexpensive way to pass the proceeds of a plan onto a beneficiary upon a plan-holder’s death. The current section 71(2) of the Wills and Succession Act allows a plan-holder to designate a beneficiary, either by a signed instrument or by a will. A plan-holder may revoke a designation by those same methods.

Issues with the current law

Beneficiary designations made with regard to plans do not follow conversions or transfers of those plans as determined in Bramley v. Bramley, 2003 BCSC 313. This means that if a designated plan is converted into another format or transferred to another institution, the beneficiary of that plan must be re-designated.

As identified by the Alberta Law Reform Institute (“ALRI”) in its 2014 Report, this is extremely problematic for incapable persons with an attorney or trustee acting on their behalf. Under the current legislation, there is uncertainty about whether the act of designating a beneficiary is considered a testamentary disposition. If it is characterized as a testamentary disposition, it is beyond the power of an attorney or a trustee to designate beneficiaries of plans.

This confusion has caused many financial institutions and insurance companies to adopt their own policies, which are inconsistent across the board. Some institutions and companies view the re-designation of renewed, replaced or converted plans as testamentary dispositions and thus, they effectively prevent attorneys and trustees from re-designating beneficiaries under those plans. While these policies exist in an attempt to respect the deeply personal act of will-making, in some circumstances they can frustrate the testamentary intentions of persons who are no longer capable of re-designating their beneficiaries.

To address this issue, the ALRI recommended that Alberta’s legislation be amended to allow attorneys and trustees to re-designate existing beneficiaries under converted, renewed or transferred plans. These amendments would align with recent Canadian court decisions and allow attorneys and trustees to carry out the designatory intentions that the plan-holder made while capable.

Proposed changes

Bill 22 proposes to repeal the current section 71(2) of the Wills and Succession Act and substitute it with sections that align with the ALRI’s recommendations. These proposed amendments would allow (a) an attorney, (b) a Public Trustee of an incapacitated person, (c) a Public Trustee of a represented adult, or (d) a person acting as trustee for a represented adult, to designate the same beneficiary under a renewed, replaced or converted plan. These amended sections will apply notwithstanding section 85(2) of the Adult Guardianship and Trustee Act and section 25(3) of the Public Trustee Act, which both state that trustees have no power to make these kinds of re-designations.

Benefits

The proposed amendments, if passed, will clarify that an attorney and a trustee are legally entitled to re-designate existing beneficiaries under renewed, replaced or converted plans. This will reduce remaining issues and uncertainty within financial institutions and insurance companies, and will assist in clarifying what actions constitute testamentary dispositions.

Limitations

It is important to note that the amendments that Bill 22 propose do not extend the powers of an attorney or a trustee to create, change or revoke a beneficiary designation, as such actions are still considered to be testamentary dispositions. Additionally, the ALRI recommended that the Wills and Succession Act should be further amended to provide that the legal end of marriage or adult interdependent relationship should have the effect of revoking a beneficiary designation in favor of a former spouse of partner; however,  Bill 22 fails to address this issue.