10 January 1996 External T.I. 9527665 - IRREVOCABLE BENEFICIARY UNDER INSURED RRIF

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.

Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.

Principal Issues:

Whether RRIF can be established to name spouse successor annuitant and children irrevocable beneficiaries upon spouse's death.

Position:

Yes

Reasons:

Because rights under 146.3(2), particularly right under (2)(e), still exists notwithstanding rights of irrevocable beneficiary under Insurance Act.

XXXXXXXXXX 952766

Attention: XXXXXXXXXX

January 10, 1996

Re: Irrevocable Beneficiary Under Life Insurance
Registered Retirement Income Fund ("RRIF")

This is in reply to your facsimile transmission of October 23, 1995, to which you attached an article from The Globe and Mail published October 10, 1995, on the topic of an annuitant naming his or her children as irrevocable beneficiaries under a life insured RRIF. You ask whether the designation in a RRIF of an irrevocable beneficiary would cause the registration of the RRIF to be revocable.

In order to be registered, a retirement income fund ("RIF") must provide, in accordance with paragraph 146.3(2)(e) of the Act, that

at the direction of the annuitant, the carrier shall...transfer all or part of the property held in connection with the fund, or an amount equal to its value at the time of such direction (less any unpaid minimum amount for the year)...to any person who has agreed to be a carrier of another registered retirement fund of the annuitant.

In our view, there is nothing in the Act which would prevent an annuitant from entering into a RIF arrangement under which he irrevocably designates a beneficiary in accordance with the Insurance Act. The plan as registered will contain the provision as required under paragraph 146.3(2)(e) of the Act. The carrier will be required to transfer only at the direction of the annuitant but also will be required to respect the rights of the irrevocable beneficiary by obtaining the beneficiary's consent to the transfer.

In the case of a RRIF under which the annuitant names his or her children as irrevocable beneficiaries, the beneficiary has the ability under the Insurance Act to protect future rights to the RRIF property. In addition, the annuitant may agree that only the "minimum amount" as defined in subsection 146.3(1) of the Act will be withdrawn each year. The successor annuitant is in turn bound by the terms and conditions negotiated by the first annuitant with the result that during the successor annuitant's life, minimum payments out of the RRIF are made to the successor and upon the successor annuitant's death the RRIF property will devolve to the first annuitant's children.

The successor annuitant steps into the shoes of the first annuitant and has no greater rights under the Act. If any transfer to another carrier were to occur, it still would only occur at the direction of the successor annuitant.

In our view the Insurance Act and the Act are not in conflict in this area. A RRIF which contains an irrevocable beneficiary designation can satisfy the conditions for registration under the Act and create enforceable rights in an irrevocable beneficiary under the Insurance Act.

We trust the foregoing comments assist, although we advise that because they are not given in the context of an advance ruling, they are not binding on the Department.

Yours truly,

for Director
Financial Industries Division
Income Tax Rulings and
Interpretations Directorate
Policy and Legislation Branch