Designating your children

August 01, 2013

This is part 2 of a three-part series (read parts 1 and 3) profiling pre-retirement survivor benefit recipients. The series explores scenarios based on the types of circumstances we see.

June is a 53-year-old single-mom who has been teaching full-time for 26 years. Her three kids are all grown-up and independent.

June tends to be highly organized and on-the-ball. She's had to be after juggling three kids and a full-time career since her divorce 20 years ago. She suffers a brain aneurysm, and passes away unexpectedly. Even though she had not retired and collected a pension, she realized that her Teachers' pension was her largest financial asset. Years ago, even before her divorce, she took the time to designate her three children as beneficiaries.

Christopher, her oldest son, is the executor of her will. Christopher knows to contact Teachers' and inform the plan of his mother's passing.

When Christopher calls, he's greeted by a Pension Benefits Specialist (PBS). Since June did not have an eligible spouse or dependent children at the time of her death, the PBS explains that a lump sum, worth the commuted value of her pension, will be divided equally among the three beneficiaries.

The PBS asks Christopher to fax or mail proof of death for his mother. This could be a death certificate or a funeral director's statement. He's also asked for a copy of June's will, to ensure that June didn't stipulate a different wish for her survivor benefit that post-dates her beneficiary designation, or that called for the division of the benefit as anything but equal among her beneficiaries.

June knew that by designating her children with the plan, each child would receive an equal share of the benefit, and so did not include any stipulations to the contrary in her will.

Once Christopher provides the proof of death, the PBS mails a package to Christopher that contains three application forms (one for each beneficiary), and instructions on how to apply for the survivor benefit.

Each of June's kids fill out the application with their respective names, mailing addresses and social insurance numbers. They attach photocopies of their birth certificates, and Christopher faxes these back to Teachers'.

Within a month, Christopher and his siblings each receive a cheque for their respective share of June's survivor benefit. Teachers' has withheld roughly 30% for taxes. When Christopher and his siblings file their income tax return the government will re-assess all of their income and determine if the amount was appropriate.

In Part 3 of our three-part series, we'll explore what would have happened if June had not designated her children as beneficiaries, but willed her Teachers' survivor benefit to them instead.