How Is an RRSP or RRIF Taxed When the Owner Dies in Ontario?
An unmatured RRSP is generally taxed as income on the final return of the person who died, based on its full value. The deceased is treated as having received the fair market value of all property in the plan immediately before death, and the amount appears in box 34 of the T4RSP.
A surviving spouse or common-law partner can often avoid that result. If all the RRSP property goes directly to the survivor's RRSP, RRIF, PRPP, SPP or an eligible annuity before the end of the year after the death, no T4RSP is issued in the deceased's name. A RRIF can continue with the survivor as the new annuitant, in which case the full RRIF value is not taxed on the final return.
An RDSP rollover is also possible for a child or grandchild who was financially dependent on the deceased because of an impairment. Growth after death is included in income by the beneficiary or the estate in the year it is received. A person who receives RRIF amounts because of the death can also be jointly liable with the deceased for part of the tax.
Key takeaways
- An unmatured RRSP is treated as received at its fair market value just before death, and that amount is included in income on the final return.
- A surviving spouse or common-law partner who receives all the RRSP property directly into their own RRSP, RRIF, PRPP, SPP or an eligible annuity before the end of the year after the death avoids a T4RSP in the deceased's name.
- If the estate is the RRSP beneficiary and the survivor is entitled under the will, the survivor and the legal representative can jointly elect in writing to treat the estate's payments as paid to the survivor.
- Growth after death is included in income by the beneficiary or the estate when received, and a person receiving RRIF amounts can be jointly liable with the deceased for part of the tax.