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From time to time, the assets of an estate are not enough to pay all debts of the estate.  Therefore, a body of law has developed to determine such issues as where creditors may look for payment after the debtor’s death, the ranking of creditor claims and the division of insolvent estates’ assets amongst beneficiaries if gifts cannot be satisfied in full after payment of estate debts and expenses.  As such, creditor proofing an estate has become a significant estate planning goal for many testators.  Furthermore, this goal has made the creditor-proof attribute of RRSP’s and life insurance policies attractive to many testators.

In Amherst Crane Rentals Ltd. v. Perring, 2004 CanLII 18104 (ON CA), Ashley James Perring had died April 30, 1998. The appellant is a creditor of the deceased. The respondent is the widow of the deceased and the designated beneficiary of two RRSP funds valued at $82,000 after withholding tax. She received the proceeds of the two funds from the two plan administrators. Because the estate of the deceased was unable to pay all of its debts and declared bankruptcy, the creditor sought to obtain payment of the outstanding debt of $53,679.28 owed by the estate from the beneficiary out of the proceeds of the RRSPs.  Interestingly, the respondent was also the beneficiary of her husband’s three life insurance policies and upon his death received the proceeds in the amount of approximately $1.27 million.

After thoroughly reviewing relevant legislation and case law, the court of appeal confirmed that RRSP proceeds do not form part of the estate of the deceased and are exempt from the claims of estate creditors.  In essence, there is no basis for a creditor to claim any interest in proceeds that do not form part of the estate of the debtor.  The court noted that to decide otherwise would mean that it would make more sense for the executor of the estate to have the obligation of collecting the RRSP proceeds and distributing them after creditors’ claims have been paid, which is not the case.

It was further concluded that there is neither a legal principle nor statutory authority that requires that the creditors have any claim on the proceeds of an RRSP that devolve directly to a designated beneficiary.

The case not only speaks to the importance of a testator taking steps to ensure that all of his or her financial obligations will be satisfied on death but also serves as a warning to creditors to put adequate mechanisms in place to obtain payment of debts.

If you have questions about the treatment of your RRSP or RRIF on death, including tax considerations, or wish to take steps to ensure your financial obligations will be satisfied on death, please contact Andrea Kelly.


Andrea Kelly, Lawyer, has extensive experience in wills, trusts, powers of attorney and estate administration matters.  She provides clients with a high standard of timely professionalism and expertise, incorporating a very thorough fact finding process.  This is quite often enlightening for her clients and facilitates individually tailored services.  If you would like to know more, feel free to use the easy contact form or read Andrea’s bio.

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