Are RRSPs and RRIFs Taxed When the Owner Dies in Ontario?
Yes. When someone dies with an unmatured RRSP, they are treated as having received the fair market value of everything in the plan immediately before death, and that amount is included in income on the final return. A RRIF's full value is not taxed on the final return where a surviving spouse or common-law partner continues as successor annuitant.
Rollovers can reduce or defer that tax. If all the RRSP property goes directly to a 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, and the survivor reports the payment and claims an offsetting deduction. RRSP or RRIF payments can also roll over to a registered disability savings plan for a child or grandchild who was financially dependent because of an impairment.
Who pays depends on where the money goes. Tax owing on the final return is paid from the estate's assets, but a person who receives RRIF amounts because of the death is jointly and severally liable for part of the deceased's tax for that year. Growth after death is taxed to the beneficiary or the estate when received. An accountant or lawyer can confirm how your situation fits.
Key takeaways
- For an unmatured RRSP, the full fair market value of the plan is included in income on the final return and shown in box 34 of the T4RSP.
- If all the RRSP property goes directly to a survivor's RRSP, RRIF, PRPP, SPP or eligible annuity before the end of the year after the death, no T4RSP is issued in the deceased's name.
- A person who receives RRIF amounts because of the death is jointly and severally liable with the deceased for part of the deceased's tax for the year of death.
- Growth after death is included in income by the beneficiary or the estate in the year it is received, so the right treatment depends on who ends up with the plan.