by Pam Mundell, CFP, CLU, CHS

How to be fair with second and third relationships.

Blended families created by second and third marriages or common law relationships present a challenge to plan to ensure fairness for all loved ones. You may want to provide your current spouse/current partner with the lifestyle you both enjoy, but also ensure your assets accumulated from a previous marriage/common law are preserved for the benefit of your children and grandchildren. Some assets pass more effectively to a spouse or common law partner, while other assets are more flexible and could transfer well to children or grandchildren.

Principal residence

If you plan to leave your principal residence to your current married spouse or common law spouse, consider registering the property as ‘joint tenants with a right of survivorship’. Upon your death, the property will pass automatically to the other joint tenant and not form part of your estate. Please be aware that there may be immediate adverse tax consequences if you transfer any property to a joint tenant who is not your spouse. If you plan to leave the principal residence to an adult child or more than one adult child consult both a tax professional and legal professional on the consequences of transferring ownership during your lifetime. Property held by two people as ‘joint tenants with rights of survivorship’ is not subject to probate, as it does not form part of your estate and will become owned 100 per cent by the other person upon your death.

Registered Retirement Savings Plan (RRSP) and/or Registered Retirement Income Fund (RRIF)

Investments in an RRSP and the subsequent RRIF are accumulated to provide sustainable retirement income during your lifetime. An RRSP and an RRIF has a named beneficiary and is an example of an asset that passes effectively to a married spouse or common law spouse at death on a tax-free rollover. You may name adult children as a beneficiary of your RRSP or RRIF, however the full value of the registered plan will be included in income in the year of your death and could create a substantial tax liability to your estate (some exceptions for financial dependent children or grandchildren). Consider the tax effects of adding the full value of an RRSP or RRIF into income in addition to all other income, Canada Pension Plan (CPP), Old Age Security (OAS), pension income, income from GICs or other investments that you have earned that year. Stock and bond portfolios and second vacation homes or rental properties will be deemed to be disposed of at the time of death. All of which may create additional tax liabilities.

Tax Free Savings Accounts (TFSA)

The TFSA is an excellent vehicle for saving or investing for many purposes including retirement. The TFSA is very flexible and you can name your married spouse or common law spouse as the successor holder of your plan. At death, your TFSA would simply be transferred to your spouse.However, this is also an excellent plan to leave to an adult child or adult children. You can name your adult children as a beneficiary of the TFSA and upon your death the proceeds of your plan are paid out to your named beneficiary. The TFSA with a named beneficiary does not form part of your estate, so does not incur probate fees. The investments in the TFSA are not included in your income, and do not create any tax liability to your estate.

Life insurance and life insurance investments

Life insurance proceeds and investments issued by life insurance companies are another example of assets that will pass to your married spouse or common law spouse, but will also transfer effectively to adult children at death. A life insurance policy has a named beneficiary and will be paid out once the life insurance company has confirmation of your death via a death certificate and a claim form completed by the executor and/or beneficiary. Life insurance proceeds with a named beneficiary do not form part of your estate and are not subject to probate. Many life insurance companies also offer investments — GICs and segregated funds — and both of these options are excellent for estate planning purposes to transfer assets to individuals other than a spouse to bypass the estate. Assets that flow outside of the estate can save time, fees and privacy for the estate. A probated will is a public document. Settling an estate takes time, money and an emotional toil. It can be a challenging job and the steps you take during your lifetime to simplify your estate will be greatly appreciated by your executor.

Careful estate planning can help simplify your estate and save money for your beneficiaries. Estate planning can be a very complicated process especially for blended families, and once second and third marriages are included. As a certified financial planner, I will often start the discussion so that a client may consider their own unique estate planning objectives. I always strongly urge a client to discuss the very specifics of each plan with a lawyer who specializes in family law. Family law is different in each province and this is an ever-changing landscape. Creating a co-habitation agreement and updating wills with the trusted legal professional is essential to ensure your unique wishes are carried out.


Pam Mundell is a licensed investment fund advisor and independent life insurance broker and the principal of Pam Mundell Financial Planning Services in Kingston, Ontario. She can be reached for questions or comments at or (613-417-7117). 


(Republished with permission from