Is an RRSP Taxable on Death in Canada? How the Tax Works

If you are settling an estate or planning your own, the first question is usually simple: is the RRSP taxable when the owner dies? The short answer is yes, in most cases, and the amount can be larger than people expect because it is taxed all at once.

This article explains how the tax is calculated, which federal rates apply, how withholding differs from the tax actually owing, and the situations where the tax is deferred or reduced. It deals with federal tax only. Provincial and territorial tax is added on top and varies, so an accountant can confirm your total.

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

Yes, the full value is generally taxable

When the annuitant of an unmatured RRSP dies, the CRA treats the annuitant as having received, immediately before death, an amount equal to the fair market value of all property held in the plan at death. The Income Tax Act provides for this in s. 146(8.8), less certain amounts payable to a surviving spouse or common-law partner.

The deemed amount is shown in box 34 of a T4RSP issued to the deceased for the year of death and is reported on the final return. This is true even when a named beneficiary actually receives the money. The deceased bears the tax on the full value, unless a qualifying survivor receives a refund of premiums.

If the RRSP names the estate, or has no designated beneficiary, the whole fair market value is the deceased's income on the final return, and the amount paid to the estate forms part of the estate that bears the tax.

The rates that apply

The deemed amount is added to the deceased's other income for the year of death and taxed at graduated rates. The federal rates for 2026 are shown below.

For the 2025 tax year, the federal rates are 14.5% up to $57,375, 20.5% to $114,750, 26% to $177,882, 29% to $253,414 and 33% above $253,414. The lowest rate was cut from 15% to 14% effective July 1, 2025, which gives the 14.5% full-year rate.

Provincial or territorial tax applies on top of the federal rates. Because the whole RRSP lands in a single year, a large balance can move a final return into the upper brackets. Bracket figures change from year to year, so confirm the figures for the year of death.

Withholding is not the same as the tax owing

When money is paid out of an RRSP as a lump sum, tax is withheld at source. For residents outside Quebec the rates are 10% up to $5,000, 20% over $5,000 up to $15,000, and 30% over $15,000. In Quebec the rates are 5%, 10% and 15%.

Those percentages are not the tax bracket rate, so the tax withheld may not cover the tax actually owing. The balance is payable when the income is reported on the return. For a death, the real tax is calculated on the final return, so treat any withholding as a deposit toward that bill, not the end of it. Non-residents of Canada face 25% withholding on RRSP payments unless a treaty reduces it.

When the tax is deferred or reduced

• Spouse or common-law partner rollover: the deemed receipt does not apply where the spouse or partner is designated as sole beneficiary and all property is transferred to their RRSP or RRIF, or otherwise rolled over, by December 31 of the year following the year of death.
• Refund of premiums: a qualifying survivor includes it in their own income but can deduct it by transferring it to a registered plan. The transfer must be completed in the year received or within 60 days after the end of that year.
• Financially dependent child or grandchild: a refund of premiums can be rolled over even if the deceased left a spouse or partner.
• Decrease in value: if the plan falls in value between death and the final distribution, the legal representative can ask that the decrease be deducted on the final return. In the CRA example, a plan worth $185,000 at death that paid out $150,000 gave a $35,000 deduction.
• No decrease-in-value deduction is available when the amount was never included in the deceased's income, for example where the full amount was rolled to the spouse.

If there is both a surviving spouse and other beneficiaries, the spouse's share can be rolled over while the others' shares are included in the deceased's deemed income. Each recipient gets a T4RSP for their share.

What to do next

• Ask the plan carrier for the plan's fair market value at the date of death and for the T4RSP slips.
• Confirm who is named as beneficiary, and whether any of them is a qualifying survivor.
• Plan for the tax bill before distributing the estate, since beneficiaries can be jointly and severally liable for the tax attributable to the amount they receive.
• Track any change in the plan's value until the final payment, in case a decrease-in-value claim applies.
• Have an accountant prepare the final return, and ask a lawyer about the estate's other obligations.

Frequently asked questions