Several members of our firm attended the recent Brown Bag Lunch hosted by the Ontario Bar Association. The case of Amherst Crane Rentals Ltd. v. Perring was addressed.
The deceased passed away in 1998, leaving a will naming his wife as his estate trustee and the sole beneficiary of his estate. She was also designated as the beneficiary of his two RRSPs. In addition, she received the proceeds of several life insurance policies. The deceased was a director of a contractor corporation, and he owed $53,679.28 under the Construction Lien Act. The claim was assigned to Amherst Crane under the Bankruptcy and Insolvency Act which then brought an application on its own behalf against the estate.
The decision is a helpful one dealing with the subject of RRSP proceeds. At the heart of the case is the problem of whether or not RRSP proceeds fall into the estate of the deceased owner, or whether they go directly to the designated beneficiary. A related issue considered by the court is whether or not creditors of the estate can make claims against the RRSP proceeds in the hands of the designated beneficiary.
At trial, it was held that the RRSP proceeds do not form part of the deceased's estate, and do not fall into the bankrupt estate. Cameron J. also held that, because the proceeds do not fall into the estate of the debtor, they are not available to creditors. He dismissed the application, awarding costs the respondent.
On appeal, the Court reconsidered the issues. A comparison was drawn to the law regarding life insurance. The Insurance Act provides specifically that the proceeds of a life insurance policy do not fall into the estate and are not subject to the claims of creditors. The Court referred to a number of cases illustrating how this issue has been dealt with by other provinces, and considered certain sections of the Succession Law Reform Act (the "SLRA") before drawing the conclusion that RRSP proceeds vest in the designated beneficiary on death and do not form part of the estate.
Regarding the further issue of whether they are still susceptible to creditors, the Court of Appeal concluded that the effect of s. 53 of the SLRA is to except RRSP proceeds in the hands of a designated beneficiary from the claims of creditors of a deceased RRSP owner's estate.
The Court of Appeal decided in favour of the deceased's wife, but did reduce the costs award against the creditor.
Leave to appeal to the Supreme Court of Canada was refused.
This case clarified that RRSPs, much like insurance policies, pass directly to the designated beneficiary on death and are not available to creditors. For many would-be testators, this will provide some comfort that their loved ones will be looked after in the event that they are unable to balance their books before they pass away.
Have a wonderful day.