Executor Rights Over RRSPs, RRIFs and Pensions After Death in Ontario

Retirement savings are often the largest asset a person leaves. An executor usually wants to know two things: does the money belong to the estate, or does it go straight to a named person, and what tax comes with it.

The answer turns mainly on whether a beneficiary was named on the plan or pension. This article explains what Ontario's published rules say about it and where you need an accountant or lawyer to look at the actual documents.

Named beneficiary or not

For Estate Administration Tax, the Ontario government excludes RPPs, RRSPs, RRIFs and TFSAs that have a beneficiary designation from the value of the estate. That means these plans do not add to the estate's value when the tax is calculated. How a particular plan is paid out to the person named depends on the plan's own documents, so it is worth confirming with the institution.

Where no beneficiary is named, the exclusion does not apply to that plan. How the plan is handled in that case depends on the plan's own documents and your situation, so it is worth confirming with a lawyer. How a particular financial institution or pension administrator handles this also depends on its own documents, so ask it directly.

What the executor actually does

Even when money passes outside the estate, an executor still has a role. You will typically notify the plan holder of the death, gather the account statements and supply the documents the institution asks for. Separately, for property that does form part of the estate, estate trustees must keep accurate records of the estate's assets and transactions.

When the plan does form part of the estate, it is distributed under the will once assets have been liquidated and funeral and burial expenses and debts have been paid. Any investment directions or limits in the will take priority over the Trustee Act's investment rules.

Tax: why you should not distribute too early

Registered plans can carry significant income tax at death, and who pays it depends on the facts. An accountant should work out the final return and any other required returns.

Before distributing any property, the legal representative of a deceased taxpayer must obtain a clearance certificate from the Minister confirming that all tax amounts have been paid or security has been accepted. A representative who distributes without one is personally liable for the unpaid tax, up to the value of the property distributed, and the Minister may assess at any time. The request is made on Form TX19 after the returns are filed and assessed and income taxes are paid or secured. If the estate has a GST/HST number, Form GST352 is also needed for clearance.

How much to hold back until clearance arrives depends on the facts, and there is no fixed official percentage.

Minors and beneficiaries who cannot be found

If a child is entitled to $35,000 or more, the money must generally be paid into court. That does not apply if a will or beneficiary designation names a trustee of the child's money, or if a judge has appointed a guardian of property. If the child will receive less than $35,000, it can be paid to the parent the child lives with or to the person with lawful custody, who holds it until the child turns 18 or reaches the age stated in the will.

Money owed to a beneficiary who cannot be found or paid can be paid into court, with the court's permission, to the Accountant of the Superior Court of Justice.

What to do next

• Ask each institution and pension administrator whether a beneficiary is on file.
• Collect statements showing values at the date of death.
• Ask an accountant to prepare the returns and advise on tax.
• Request the clearance certificate before distributing.
• Talk to a lawyer if the beneficiary designation is unclear or disputed.

Frequently asked questions