TFSAs & RRIFs: What’s the difference between beneficiaries, successor holders and successor annuitants? + MORE Jan 23rd

A MoneySense reader writes: 

I’m writing to ask about beneficiaries, successor holders and successor annuitants for TFSAs and RRIFs. What is the difference between these, and how do you choose the right one for each account?

FPAC responds: 

When you have a registered account, such as a tax-free savings account (TFSA), a registered retirement savings plan (RRSP) or a registered retirement income fund (RRIF), you have the option—depending on which account you have—of naming a beneficiary or a successor for that account. First, let’s break down the differences between beneficiaries and successors.

A beneficiary inherits the assets in your account without inheriting the account itself.

A successor takes ownership of your account and all of the assets in your account. 

Whether you can name a beneficiary or successor depends on which registered account you have, but this chart shows the options: 

Account TypeBeneficiary OptionsRRSPOne or more beneficiariesRRIFOne successor or one or more beneficiariesTFSAOne successor or one or more beneficiaries

So, what’s the difference between a successor holder and a successor annuitant? For a TFSA, the successor is called a successor holder (short for successor account-holder)…

Some investors prefer to park most of their investments in a broadly diversified portfolio of ETFs and then use a small portion of their account to speculate on riskier investments. This “core and explore” approach can be a sensible way to curb your investing FOMO (fear of missing out) without risking your retirement savings on speculative bets.

One way to manage a core-and-explore approach and keep reasonable checks on your behaviour is to limit the “explore” part of your portfolio to no more than 5% to 10%. The amount is up to you, but the point is to decide ahead of time what your explore threshold will be and what rules you’re going to follow—and then stick to those guidelines over time.

Staying disciplined with this portion of your investment portfolio is important because speculative investments such as individual stocks, thematic ETFs and cryptocurrencies can be incredibly volatile. That means your 10% “play money” allocation could quickly become 20% of your portfolio (or more) if one of your speculative picks pans out…