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Understanding the Locked-In Retirement Account (LIRA)

will estate kanata lawyerWhat is a LIRA?

If you have a registered pension plan with an employer and you are laid off or change employers, your pension will be transferred to a Locked-In Retirement Account (LIRA). LIRAs are similar to RRSPs but with some specific restrictions. For example, funds in a LIRA only become ‘unlocked’ when the holder retires or reaches a specified age set out in the legislation.

When can payments from a LIRA start?

Generally speaking, the earliest age that withdrawals can begin is 55. The LIRA must also be converted into a Life Income Fund (LIF) or Locked-in Retirement Fund (LRIF) before withdrawals can begin. There are minimum and maximum yearly withdrawal amounts.

Can I designate a beneficiary of my LIRA?

It is important to be aware that designating a beneficiary of a LIRA is more restrictive than for other registered investments like RRSPs and RRIFs. There are 3 options for designating a beneficiary of a LIRA:

  • your estate,
  • your spouse (or common law partner) or,
  • another individual

Another important caveat to note: unlike with RRSPs and RRIFs, if you wish to designate someone other than your spouse or common law partner, he or she must waive his or her spousal entitlement. This must be done in the specific manner set out in the legislation.

The financial institution which administers your LIRA may request that you sign a Federal Pension Addendum. It sets out what should happen to your LIRA upon your death.

It is critical that you review all of your beneficiary designations as part of your estate planning. Call 613.836.9915 or email to schedule an appointment to meet with me. We will explore every facet of your unique situation to ensure your beneficiary designations sync with your overall estate planning goals.

Reproduction of this blog is permitted if the author is credited.  If you have questions or if you would like more information, please call us at 613 836-9915. This blog is not intended to be legal advice but contains general information.  Please consult a lawyer or other professional to determine how the information in this blog might apply to you.

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