Alberta Law Reform Institute Report on Beneficiary Designation by Substitute Decision Makers

The Alberta Law Reform Institute has released a report on Beneficiary Designation by Substitute Decision Makers that deals with the issue of who gets to designate beneficiaries of pension plans and insurance policies when the owner has lost legal capacity, especially due to age.

It is legally unclear if a substitute decision maker has the legal authority to make, change or revoke beneficiary designations on behalf of the represented adult.

The report proposes changes to a number of provincial Acts:

"This report recommends legislative changes to ensure that testamentary wishes are respected. The most common situation is when an attorney or trustee needs to transfer a plan or policy from one institution or company to another, or to convert an RSP to an RIF when the owner attains age 71. The first recommendation would clarify the law by expressly allowing an attorney or a trustee to make an administrative change on behalf of the donor or represented adult by designating any beneficiary named under a plan or policy when renewing, replacing or converting that plan or policy."

"Another situation where the inability to update beneficiary designations may produce unexpected and unfair results is the beneficiary designation in favour of a former spouse or adult interdependent partner. There is a common misconception that such a designation is revoked at the end of a marriage or an adult interdependent partnership. But this is not the case. While a gift in a will to a spouse or adult interdependent partner is revoked as though the former spouse or adult interdependent partner had predeceased the testator, a beneficiary designation remains in effect unless the plan or policy owner takes some positive action to change that designation. If the owner has lost the capacity to designate a new beneficiary – and the attorney or trustee does not have the authority to make, change or revoke the designation – the former spouse or adult interdependent partner will continue to benefit. The same will happen if the plan or policy owner forgets to revoke the unwanted beneficiary designation. The second aspect of our recommendations would clarify the law by making it consistent with the approach taken with respect to gifts in a will."