^ Read the GIC contract that was "supposedly" provided to you. If not provided to you, ask for it. There're T&Cs on there wrt to death of the GIC holder.

 

From what I recall, TD allows GICs to be cashed in the event of a death.

 

^ I would hope so, not without a penalty. After-all, the GIC ain't the banks' monies.

 

I have seen/heard of three scenarios; 1. just hold it until maturity, 2. return of initial capital and forego all interest, 3. buy-out somewhere in between.

Suggest you just ask for the contract.

You may also wish to consider a ladder of GICs that come due, say every year or every six months, splitting up the investment into pieces. So something is always available in the near term.

 

BMO pays the capital plus all accrued interest to the estate bank account as soon as ordered by legally appointed executors, regardless of maturity dates. I just did it a few months ago.

 

RBC pays out the GIC with accrued interest to the holders account. Funds released after Probate complete.

I can confirm that TD does the same as BMO/RBC.

 

GICs seem back in vogue right now but I am nervous about buying longer term ones.

Just buy 1 year GICs, the difference is minimal right now ... 4.6% (1 yr) vs 4.9% (5 yr).
The way things are going you might even get a higher rate when the 1 yr is up.

 

RBC pays out the GIC with accrued interest to the holders account. Funds released after Probate complete.

 

My experience is that GICs are 'matured' with accrued interest on the direction of the Executor in non-registered accounts once probate is obtained. Several years ago, RBC DI gave me two options on mother's estate: 1) mature the GIC with accrued interest net of a $100 administration fee, or 2) sell on the secondary market which they didn't recommend due to terrible pricing.

In the case of a registered account with a surviving spouse as successor holder/successor annuitant, no maturation was necessary as the accounts just rolled over to the surviving spouse. In the case of a non-spouse beneficiary or the estate, the options may be more complex or no options at all .One would have to ask their brokerage. Note that GICs held through a broker are held in nominee name so by definition they should be transferable.

In the case of retail GICs held directly with an FI, one would have to ask each FI of their procedures but I would be surprised if any prohibited maturation with accrued interest, perhaps with a fee attached to it (or not).

 

If you hold GICs directly with FIs, I think you will have to check with them directly. I have no experience there.... only through GICs held in nominee name at discount brokerages.

 

How bad or inconvenient is it if someone dies while still holding GICs that have not yet matured?

Not bad or inconvenient at all … most institutions will cash the GIC with no penalty and no loss of interest.

GICs seem back in vogue right now but I am nervous about buying longer term ones.

MIL started to feel that way after FIL died… so from that point forward she went with various shorter terms, including many oddball 15, 18, or 30 month terms, and gimmicky rate-escalator GICs … never anything over 3 years … all on the premise that she might not live long enough to see a 5 yr GIC mature … and this went on for 20 years.

In the end, every institution she had GICs with (there were 3) cashed out the GICs without any hesitation … it was their Standard Operating Procedure … they even cashed out joint GICs in which the surviving joint owner was still alive … and they allowed us to leave one GIC uncashed (at our option), because it was a “rate-escalator” that was just coming into its final, highest rate, year, with a rate that couldn’t be matched in the market … so the estate earned some decent interest while we were going through the probate and closure process.

I figure MIL left at least $20k -$30k of foregone interest on the table, by opting for lower interest rates (shorter terms).

You can add BNS, Meridian CU, and Tangerine to the list above ... these were all held directly with the institution, not through a discount brokerage.

 

An afterthought ... I have some GICs with Oaken ... so as we were dealing with MIL's estate, I called Oaken to enquire about their policy ... I was told that their GICs are unbreakable, even in the event of death ... mind you, these were the front line call center staff, so I'm not sure I believe them ... it would be the back-office estate department who would know the answer, but I didn't bother to press.

 

I suspect the Oaken front line were blowing smoke out of their butts. Distribution of proceeds of registered accounts in particular to multiple beneficiaries would almost certainly require breaking up of GICs to facilitate distribution.

Added: Not really pertinent to this thread but for those seniors, likely pre-boomers over 75 who are more likely to have their financial assets in GICs almost exclusively, management of GIC ladders becomes a 'make work' project for somebody. It is not too bad if it is limited to a 10 GIC ladder, e.g. maturities every 6 months, but if it is a convoluted mass of spagetti, I empathize with whoever has to manage that sort of thing.

 

My wife finished handling her Mom's estate a couple of months ago. The lawyer told us it could take up to a year to complete. It took 25 months.

I suspect the lawyer was milking the account. He didn't even find an accountant to do the final taxes for a few months. Even if it had been cleaned up in one year, that's the entire duration of a one year GIC.

Maybe this isn't as big of a problem as it seems?

 

I don't think it's that much of a problem. I have been handling my parents' affairs. I asked the questioned when my mom had some GIC's that weren't matured, and we were told she was terminal with out days, maybe weeks to live. The GICs were to be used to help with some of the funeral costs. The bank told us in the event of a death, the GIC could be redeemed without penalties. However, depending on the kind of GIC, some would pay out the accrued interest, some would not. The amount wasn't big anyways, so it was fine. My mom is still alive, 3 years after, but we stopped buying GICs after the last ones matured. She wasn't supposed by now, so we just leave it.

 

FWIW, we never worried about GICs with maturities extending beyond one's lifespan. We were still rolling over my mother's 5 year GIC ladder (10 GICs) when she was 96 and passed away. RBC DI did the legwork to establish accrued interest to date of death (for Final T1 purposes) and ongoing interest became testamentary trust income, and RBC DI 'matured' the GICs once we had probate.

 

Thanks again Alta - that's the third time today you've made me feel more relaxed about my GICs - and I'm thousands of days younger than your mother was!