What happens to my spouse's RRSP when they die and can I defer the tax on it in Ontario?
A spouse's RRSP can pass to you tax-deferred, but it depends on who is named and how the money is moved. If you are the sole beneficiary and all RRSP property is transferred to a plan for you by December 31 of the year after death, the deceased is not taxed on the RRSP value. Otherwise the deceased is considered to have received the RRSP's fair market value at death, reported on the final return, though a legal representative can reduce this using Chart 2 where a qualifying survivor receives a refund of premiums.
If you receive a refund of premiums, you can defer tax by transferring it to your own RRSP, PRPP, SPP, RRIF or eligible annuity, in the year received or within 60 days after the end of that year. To use an RRSP, you must be 71 or younger at the end of the year of transfer, while older survivors can use a RRIF or annuity.
A RRIF works similarly: if the spouse is named successor annuitant, the deceased is not taxed on the RRIF value and you report the payments. Without one, the RRIF's fair market value is included in the deceased's income.
Key takeaways
- If the spouse or common-law partner is sole beneficiary and all RRSP property is transferred to a plan for them by December 31 of the year after death, the deceased is not taxed on the RRSP value.
- Otherwise the deceased is considered to have received the RRSP's fair market value at death, reported on the final return, though a legal representative can reduce this using Chart 2 where a qualifying survivor receives a refund of premiums.
- A survivor can defer tax on a refund of premiums by transferring it to their own RRSP, PRPP, SPP, RRIF or eligible annuity, within the year received or 60 days after the year ends.
- To transfer into an RRSP the survivor must be 71 or younger at the end of the year of transfer, and older survivors can use a RRIF or annuity.