RRIF Beneficiary: What Happens to the Account at Death in Ontario

If a parent, spouse or other relative has died and left a RRIF, you may be wondering whether the money is yours, who pays the tax and whether it needs to go through probate. The answer depends on whether you were named as a beneficiary or as a successor annuitant.

This article walks through how a RRIF is generally treated at death in Ontario, from a relative's point of view. The plan wording and the family circumstances can change the result, so confirm the details with the plan issuer and an accountant or lawyer.

Beneficiary or successor annuitant?

Start by finding out which role, if any, you were given. A successor annuitant takes over the RRIF. If the contract or the will names the spouse or common-law partner as successor annuitant, the deceased is not treated as receiving the RRIF value at death, and the RRIF continues with the spouse as annuitant.

A named beneficiary is paid the benefit instead. In Ontario, a plan participant can designate a person to receive the benefit payable on death, and the plan administrator is discharged on paying the designated person, who may enforce payment. If the deceased made a designation in a will, it counts only if the will relates expressly to the plan, and the last valid designation made, in the will or on the plan form, controls.

Who is taxed on a RRIF

Where there is a named beneficiary and no successor annuitant, the deceased is generally treated as receiving the fair market value of all property held in the RRIF at death. Amounts paid to a qualifying survivor can be treated as a designated benefit, which reduces the amount taxed to the deceased.

Income earned in the RRIF after the annuitant's death must be reported by the designated beneficiaries. So there can be two layers: tax on the value at death, reported on the final return, and tax on later growth, reported by the person who receives it.

• Successor annuitant: the spouse reports the payments they receive.
• Named beneficiary: the value at death is generally taxed to the deceased, with a reduction for amounts paid as designated benefits.
• Growth after death: reported by the designated beneficiaries.

Spouses, children and grandchildren

If the spouse or common-law partner was not named as successor annuitant, they may still become one if the deceased's legal representative consents and the RRIF carrier agrees.

For other qualifying survivors, the position is more detailed. A financially dependent child or grandchild generally must have lived with and depended on the annuitant, and their net income for the previous year must have been below the unreduced maximum basic personal amount, with a higher threshold where the dependence was due to mental or physical infirmity. A child or grandchild who was dependent but not because of an impairment can defer tax only by buying a term annuity, which can run for no more than 18 years minus the child's age when it is bought. For a financially dependent infirm child or grandchild, proceeds can be rolled into their RDSP, up to the $200,000 RDSP lifetime limit, using Form RC4625. The income thresholds change each year, so confirm current figures with the CRA or an accountant.

The estate's role and probate

Registered plans such as RRIFs that have a beneficiary designation are excluded from the estate value used to calculate Estate Administration Tax. Even so, the estate trustee still has work to do: collecting assets, paying taxes and debts, and distributing the residue. Amounts paid through the estate can still count as designated benefits if the legal representative and the qualifying survivor jointly file Form T1090.

A legal representative should get a CRA clearance certificate (Form TX19) before distributing estate property. Anyone who distributes without one is personally liable for unpaid amounts, up to the value of the assets distributed, and the application is made only after returns are assessed and amounts are paid or secured. A person who is a dependant may also have a support claim that reaches assets paid under a plan designation.

What to do next

• Ask the RRIF issuer for confirmation of whether there is a successor annuitant or a beneficiary, and in what form.
• Obtain a death certificate and the plan's claim forms.
• Tell the estate trustee, if there is one, about the RRIF so the final return is prepared correctly.
• Ask an accountant whether any survivor deferral applies to you.
• Keep records of every payment you receive, because you may need to report income earned after death.
• Do not pay anyone a fee to release an inheritance, since that is a warning sign of fraud.

Frequently asked questions