- A refund of premiums is an RRSP amount paid because of the annuitant's death to a spouse or common-law partner, or to a financially dependent child or grandchild.
- The qualifying survivor reports it in their own income and can deduct it by transferring it to a registered plan.
- The transfer must be done in the year received or within 60 days after year end.
If you have received a T4RSP after someone's death, you may see the words "refund of premiums". It is a technical term, but it matters because it decides whether you are taxed on the money or whether the deceased's final return carries the tax.
Below is how the term works in plain words, who qualifies, and what the rollover rules look like.
This article covers Canadian federal tax law, which applies in every province.
What a refund of premiums is
In the Income Tax Act, a refund of premiums is an amount paid out of an RRSP as a consequence of the annuitant's death, to either a spouse or common-law partner of the annuitant immediately before death, or a child or grandchild financially dependent on the annuitant for support.
Those people are called qualifying survivors. Anyone else who receives RRSP money, such as an adult child who was not dependent, receives a taxable payment and cannot use the rollover.
Who is taxed on it
Without a refund of premiums, the deceased is treated as having received the full value of the RRSP just before death, and the tax is on the final return. A refund of premiums changes that: the deceased's final-return income is reduced by the amount paid to qualifying survivors.
The survivor includes the refund in their own income, shown in T4RSP box 18, and can deduct it by transferring it to their own RRSP (line 20800 with Schedule 7) or to a RRIF or annuity (line 23200). A transfer to an RRSP requires the survivor to be within the RRSP age limit, which the CRA describes as younger than 71 at the end of the year the transfer is made; a survivor past that limit transfers to a RRIF or annuity instead. A rollover to an RDSP is a separate route that applies only to a child or grandchild who is dependent because of impairment and who is the RDSP beneficiary.
Where there is a spouse and other beneficiaries, the spouse's share can be rolled over while the other beneficiaries' shares are included in the deceased's deemed income.
There is also a separate spousal exception. 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.
Who counts as a dependent child or grandchild
- A child or grandchild who is not disabled must have ordinarily resided with and depended on the annuitant, and their net income for the year before death must be less than the unreduced maximum basic personal amount.
- If the child or grandchild has a mental or physical infirmity, the income limit is higher: the basic personal amount plus the disability amount.
- Non-resident dependants may qualify if they received significant financial support from the annuitant, but a written request to the CRA tax services office is needed.
A financially dependent child or grandchild may roll over a refund of premiums even if the deceased left a spouse or common-law partner.
Where the money can be rolled
| Survivor | Where the refund can be transferred |
|---|---|
| Spouse or common-law partner within the RRSP age limit (younger than 71 at the end of the year of transfer) | Own RRSP, or a RRIF or annuity |
| Spouse or common-law partner past the age limit | RRIF or annuity, not an RRSP |
| Dependent child or grandchild, not infirm | Eligible annuity only, running not more than 18 years minus their age when bought, with payments starting no later than one year after purchase |
| Child or grandchild dependent because of impairment | May be rolled to their RDSP, within the $200,000 lifetime RDSP limit |
The transfer must be completed in the year it is received or within 60 days after the end of that year. Because age limits and plan types affect which route is open, it is worth confirming the details with a lawyer or accountant.
When the money is paid to the estate
A payment to the estate is 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 instead of the final return.
If the estate is named and no such election is made, the whole fair market value is the deceased's income on the final return.
If the plan falls in value between death and final distribution, the legal representative can ask that the decrease be carried back and deducted on the deceased's final return, using Form RC249 and a reassessment. This is generally unavailable if the plan held a non-qualified investment after death, or if the final distribution is made after the end of the year following the year of death, although the CRA may waive that case by case. An increase in value after death is included in the income of the beneficiary or estate that receives it, for the year it is received.
A person who receives RRSP money and was not the annuitant can be jointly and severally liable with the last annuitant for the part of the tax for the year of death that relates to that amount. That means beneficiaries can be pursued for the tax if the estate cannot pay.
What to do next
- Check your T4RSP: a refund of premiums paid to a qualifying survivor is shown in box 18. If the boxes on your slip are unclear, it is worth confirming them with an accountant.
- Confirm whether you are a qualifying survivor.
- Decide where the money will go and note the deadline.
- If the money goes to the estate, ask the legal representative about Form T2019.
- Ask a lawyer or accountant to confirm the plan before moving funds.
Frequently asked questions
Is a refund of premiums the same as a normal RRSP withdrawal?
No. It is an amount paid because of the annuitant's death to a qualifying survivor. It can be deducted if it is transferred to a registered plan.
Can an adult child get a refund of premiums?
Generally only if they are financially dependent on the annuitant and meet the income tests. A non-dependent child or grandchild receives a taxable payment, not a rollover.
What is the deadline for the rollover?
The transfer must be completed in the year the amount is received or within 60 days after the end of that year.
What if the RRSP was paid to the estate?
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.
Sources
- CRA – RC4177, Death of an RRSP Annuitant — canada.ca
- CRA – Examples: Death of an RRSP or RRIF annuitant — canada.ca
- Income Tax Act, s. 146(1) — Justice Laws (federal)
- CRA – Amounts paid from an RRSP or RRIF upon the death of an annuitant — canada.ca
- Income Tax Act, s. 160.2 — Justice Laws (federal)
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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