ELITE ADVISOR BEST PRACTICES

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By Glenn S. Demby, Esq.

Key Takeaways:

  • Although rules vary by province, Canadian pension laws follow the same basic order of succession.
  • Married spouses have first priority in survivor benefits. Common-law spouses are next in line.
  • If there are no spouses, the designated beneficiary gets the money.
  • If there are no spouses or designated beneficiaries, the benefits go to the member’s estate. Next of kin and third-party creditors have no claims unless they get a court order.


If you’re based in Canada or serve Canadian or dual-citizen clients, now might be a good time to brush up on the pension survival benefit rules.

As in the U.S., battles over pension survival benefits are common in Canada. Here’s what you need to know to help one of your clients—be it a spouse, ex-spouse, child or even third-party creditor—assert a claim to the vested pension benefits of a member who had retired before passing away.

What the laws require

Under Canadian pension laws, survivor benefits don’t necessarily go to the beneficiary the member designates. Although specific rules vary by province, all jurisdictions follow the same basic order of succession.

First priority: The married spouse

If the member is married when benefits become due (usually at retirement), benefits go to the spouse upon the member’s death. This is true even if the member designates a different beneficiary.

Example: Bob is in the middle of a nasty divorce and it looks like his wife, Jo, will get most of his assets. So he designates his son Mo as his beneficiary. Bob dies before the divorce is final. Since the divorce isn’t finalized, Jo remains the beneficiary and Mo doesn’t get a nickel (Canada doesn’t mint pennies anymore).

Exceptions. There are two exceptions to the first priority status of a married spouse rule:

  1. Waiver. Members can designate another beneficiary if a spouse waives his or her right to survivor benefits.
  2. Non-cohabitation. If the spouse no longer lives with the member and the member lives with someone else when benefits become due, most jurisdictions (including federal, AB, BC, MB, NL, ON and QC—but not PEI, NS or SK) give the new partner priority over survivor benefits as long as he or she has lived with the member for a certain amount of time (typically two to three years).

Example: Jim separates from his wife, Lea, after 10 years of marriage, but they never divorce. Jim designates Ann, the woman he’s been living with for the past five years, as his beneficiary. Ann is deemed Jim’s common-law spouse. So the (Saskatchewan) court orders the plan to distribute Jim’s benefits to her rather than Lea.

Second priority: The common-law spouse

If there’s no actual spouse, the common-law spouse has priority over any non-spouse designated beneficiary. The definition of common-law spouse varies by jurisdiction, but typically it includes couples who don’t go through a formal wedding ceremony but who live together for a set period of time (usually two to three years, or less if they have a child together) and hold themselves out as being married.

Exception: Like actual spouses, common-law spouses can waive their rights to survivor benefits and let the member designate another beneficiary.

Third priority: The designated beneficiary

If the member doesn’t have a spouse—actual or common-law—the designated beneficiary is first in line for survivor benefits. The twist: Members may designate a non-spouse as their beneficiary and neglect to tell the plan administrator that they actually do have a spouse. So, administrators are not allowed to distribute the survivor benefits to the designated beneficiary unless and until they confirm that the member does not, in fact, have a spouse.

Fourth priority: The member’s estate

If the member has neither a spouse nor a designated beneficiary, survivor benefits go to the member’s estate and are distributed in accordance with the member’s will. In other words, next of kin and third-party creditors have no claim on the member’s money unless they get a court order requiring the plan to pay them the benefits.


About the Author

Glenn Demby is an attorney and prize-winning B2B journalist who specializes in explaining the law in plain English and providing how-to solutions to help business professionals overcome their compliance challenges. He can be reached at 203-354-4532 and at glennsdemby@gmail.com.