Can an RRSP Be Transferred to a Spouse Tax-Free in Canada?

Losing a spouse or partner is hard enough without a tax surprise. The good news is that Canadian tax rules allow a surviving spouse or common-law partner to move the RRSP into their own registered plan and avoid the tax on the final return.

This article explains the two main routes, the conditions and deadlines that apply, what changes when there are other beneficiaries, and how a RRIF differs. It covers federal tax only. Because details depend on how the plan and will are worded, a lawyer or accountant can confirm your situation.

This article covers Canadian federal tax law, which applies in every province.

The short answer: yes, if the rollover is done properly

Normally, the full value of an RRSP is treated as received by the deceased immediately before death and reported on the final return. For a spouse or common-law partner, there are exceptions that avoid that result.

The deemed receipt does not apply where the spouse or common-law partner is designated in the RRSP contract or the will as sole beneficiary and all property is transferred to the spouse's RRSP or RRIF, or otherwise rolled over, by December 31 of the year following the year of death. The spouse then reports the amount received.

So the rollover avoids the deemed receipt on the deceased's final return. How and when the spouse is taxed afterwards depends on the plan the money goes into and on the facts, so it is worth confirming with an accountant or lawyer.

The refund of premiums route

A second route is the refund of premiums. Under s. 146(1), this means an amount paid out of an RRSP as a consequence of the annuitant's death to a spouse or common-law partner of the annuitant immediately before death, or to a child or grandchild financially dependent on the annuitant for support.

The survivor includes the refund of premiums in their own income, and can deduct it by transferring it to their own RRSP (if they are 71 or younger at the end of the year of the transfer), or to a RRIF or annuity. A financially dependent child or grandchild who is not infirm can transfer only to an eligible annuity, which must run for not more than 18 years minus their age when it is bought, with payments starting no later than one year after purchase. A child or grandchild who is dependent because of impairment in physical or mental functions can instead roll it to their own RDSP, subject to the $200,000 lifetime RDSP limit. When this happens, the deceased's final-return income is lowered by the refund of premiums paid to qualifying survivors.

If the money is paid to the estate instead, it counts as a refund of premiums only if a qualifying survivor is a beneficiary of the estate and the legal representative and the survivor jointly file Form T2019. This lets the income be taxed to the survivor rather than on the final return.

Conditions and deadlines to watch

• Timing: the transfer must be completed in the year the refund is received or within 60 days after the end of that year.
• Age: a transfer to an RRSP requires the survivor to be 71 or younger at the end of the year of the transfer.
• Survivor past the age limit: they cannot roll into an RRSP and instead transfer to a RRIF or annuity.
• Sole beneficiary rollover: all property must be transferred by December 31 of the year following the year of death.
• Paperwork: the transfer is deducted on the survivor's return, using line 20800 with Schedule 7 for an RRSP, or line 23200 for a RRIF, RDSP or annuity.

Form line numbers change between versions of the tax forms, so check the current return and guide when filing.

When there are other beneficiaries, a RRIF or an annuity

Where there is a surviving spouse or common-law partner and other beneficiaries, the spouse's share can be rolled over while the other beneficiaries' shares are included in the deceased's deemed income. Each recipient gets a T4RSP for their share.

With a RRIF, a spouse or common-law partner named as successor annuitant triggers no deemed receipt on death. The RRIF continues, the spouse becomes the annuitant and is taxed only on the payments they later receive. A spouse who is not named can still qualify if the legal representative consents and the carrier agrees. A RRIF beneficiary who is not a successor annuitant is different: the tax is on the deceased's final return unless a qualifying survivor rolls over the refund of premiums.

If the RRSP has already become an annuity, a surviving spouse or common-law partner entitled to receive amounts becomes the successor annuitant and reports payments from T4RSP box 16. If the spouse is named alongside other beneficiaries, they become successor annuitant only for their share. If there are no designated beneficiaries, the spouse may elect in writing, jointly with the legal representative, to become successor annuitant.

What to do next

• Get the beneficiary designation and the will, and check whether the spouse or partner is named as sole beneficiary.
• Confirm whether the plan is an RRSP, a matured RRSP or a RRIF, and whether a successor annuitant is named.
• Write down the transfer deadlines, including 60 days after the end of the year of receipt and December 31 of the year after death.
• If the money is going through the estate, ask about Form T2019 with the legal representative.
• Check the survivor's age against the RRSP age limit before choosing the receiving plan.
• Ask an accountant or lawyer to confirm the plan before any money moves.

Frequently asked questions