How Is a Deceased Person's RRSP or RRIF Taxed at Death in Alberta?
This answer covers the law of Alberta.
The full value of a deceased person's RRSP or RRIF is generally taxed on their final return, not in the hands of the person who receives the money. The CRA treats the annuitant as having received the fair market value of all plan property just before death, included in income for the year of death. Because that tax falls on the final return, it is paid from the estate.
A named beneficiary does not pay tax again on an amount that can reasonably be regarded as already included in the deceased's income. Income the plan earns after death is taxed to the designated beneficiaries or the estate when received.
The main exceptions involve a surviving spouse or other qualifying survivor. If the spouse is the sole designated beneficiary of an RRSP and all the property moves into a qualifying plan of the spouse by December 31 of the year after death, the deemed receipt does not apply. A RRIF has a similar exception. Spouses and financially dependent children or grandchildren (dependent because of impairment) can roll a refund of premiums into their own plan within time limits. An RDSP can receive proceeds for a financially dependent infirm child or grandchild, up to a $200,000 lifetime limit.
Key takeaways
- The full fair market value of an RRSP or RRIF is generally included in income on the final return for the year of death.
- The tax on the plan value falls on the final return and is paid from the estate, not again by a named beneficiary.
- A spouse or common-law partner who is the sole designated beneficiary of an RRSP can avoid the deemed receipt if all the property moves to a qualifying plan by December 31 of the year after death.
- Income earned in the plan after death is taxed to the designated beneficiaries or the estate when received.