Legal Blog

RSP

Under the Execution Act, a creditor may direct a sheriff to seize and sell an RSP that is not part of any insurance plan. It is an asset like any other asset. If the owner of the RSP dies, then the proceeds of the RSP become the property of the estate of the deceased owner. If the owner had creditors at the time of death, the estate trustee must use the funds to repay the debts of the owner before the trustee may distribute any of the assets of the estate to the beneficiaries.

However, what happens when, as is usual, the owner designates in the RSP that, upon the owner’s death, the plan’s administrator (e.g. a trust company) is to transfer the proceeds of the RSP to a designated beneficiary? Does that beneficiary take the proceeds subject to the claims of the creditors?

This question was answered in Amherst Crane v. Perring, a 2002 decision of the Ontario Superior Court of Justice. The judge decided that, pursuant to the Succession Law Reform Act, the person administering the RSP could pay the proceeds of the RSP directly to the person that the owner had previously designated. The funds were transferred outside of the will and did not form part of the estate of the owner. Accordingly, it mattered not what the owner’s debts were at the time of death; the creditors of the estate had no right to the RSP funds.

Moral 

The spoils go to the swiftest. If a creditor waits too long, it may find that the assets that it thought could be used to repay its debt are disbursed.

There was no allegation in the case that the deceased made the beneficiary designation as a fraudulent conveyance. If that were the case, the creditor could have attacked the designation and traced the proceeds to the beneficiary.