Under WESA almost every Benefit Plan will likely see the money paid directly to the named beneficiary under the Benefit Plan
Benefit Plans of the testator are often the subject of much interest from the executor of a Will. They are also the subject matter of WESA.
WESA applies to all Benefit Plans regardless of when they were created. “Benefit Plan” is defined to mean:
- Any pension plan, retirement plan, welfare fund, profit-sharing fund, trust, scheme, contract or arrangement that exists for the benefit of employees or former employees of an employer;
- A fund, trust, scheme, contract or arrangement for the payment of annuity; and
- Any tax-free savings account.
WESA gives the rights described below to members of a Benefit Plan regardless of whether the Benefit Plan itself gives those rights to the member.
WESA applies in respect of a “Benefit” that is paid from a Benefit Plan, meaning a benefit payable on the death of the testator. Therefore, WESA applies to a pre-retirement and post-retirement death benefit paid from a pension plan.
For any Benefit payable from a Benefit Plan, the member can:
- Designate a person who will receive the Benefit;
- Change any designation that is not irrevocable;
- Designate multiple beneficiaries as well as alternate beneficiaries;
- Make an irrevocable designation to a beneficiary, which means that once the beneficiary has been designated the member cannot revoke that designation without the beneficiary’s consent; and
- Make a beneficiary designation in a Will even if that designation is not in the form used by the plan (though an irrevocable designation may not be made in a Will and may only be made using the form adopted by the plan administrator).
WESA also provides certain clarifying and helpful rules:
- Determines what happens if a beneficiary dies before the testator (the Benefit is paid to the surviving beneficiaries unless an alternate has been designated);
- Expressly states that payment of a Benefit to a Trustee of a beneficiary (such as where the beneficiary is a minor) fully discharges the plan administrator’s duties;
- Gives the plan administrator the right to set up any defence that would have been available to the administrator in respect of the testator; and
- Expressly states that if an administrator pays a Benefit to the designated beneficiary, the administrator is discharged from liability even if the administrator later receives a notice of change of a designated beneficiary.
WESA does not apply to contracts to which the Insurance Act applies, such as life insurance plans.
Most importantly, if WESA conflicts with another statute, the other statute prevails. This means that the beneficiary designation rules set out above do not override the extent that the payment on death of a testator is required by another statute. For example, the testator’s spouse may have a claim for the benefits under law.
So, what does that all mean? Under WESA most every Benefit Plan will likely see the money paid directly to the named beneficiary under the Benefit Plan not the named beneficiaries under the Will. In other words, the death benefits paid out do not form part of the estate in most cases.
There is little an executor or beneficiary under the Will can do to pull the death benefits back into probate for ultimate distribution to the named beneficiaries under the Will. Hence, money paid out under a Benefit Plan will most often flow over to the named beneficiary under the Benefit Plan without going through probate. The exception is if the testator did not name a beneficiary under the Benefit Plan or designated the beneficiary as his/her estate.
Assets Subject to a Wills Variation Claim
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