RRIF Minimum Payment in the Year of Death in Canada

A RRIF is set up to pay out a scheduled amount each year, so it is natural to ask what happens to that payment when the annuitant dies part-way through the year. Families often expect the final return to show only the payments made up to the date of death. In practice, the larger issue is usually the value of the fund itself.

This article explains how the CRA treats a RRIF at death, how payments made after death are reported, and why a surviving spouse or common-law partner may be treated differently from other beneficiaries. It is general information, not advice on your particular plan.

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

The big rule: the whole fund is treated as received

For a RRIF, the annuitant is treated as having received, immediately before death, the fair market value of all the property in the fund. The Income Tax Act says the same thing about the last annuitant of a RRIF. This deemed amount is shown in box 18 of a T4RIF and reported on the final return.

In plain words, the final return does not just pick up the scheduled payments. It generally picks up the value of what was left in the plan, as if the annuitant had cashed it out the moment before death. That amount is added to the deceased's other income for the year and taxed at graduated rates, with provincial or territorial tax on top.

Scheduled payments and payments after death

How a payment already received before death fits alongside the deemed amount depends on the plan, the dates and how the carrier issued its slips. The plan's T4RIF is the document to read closely, and an accountant can confirm how each box fits into the final return.

Payments made after death are treated differently from the deemed amount. Amounts received after death by a named beneficiary or the estate are reported on a T4RIF box 22, a spouse or common-law partner's post-death income is reported in box 16, and amounts transferred to a qualifying plan appear in box 24.

Successor annuitant versus beneficiary

If a spouse or common-law partner is named as successor annuitant in the RRIF, no deemed receipt applies on death. The RRIF continues, the spouse becomes the annuitant, and the spouse is taxed only on the payments they later receive. A spouse who was not named can still qualify if the legal representative consents and the carrier agrees.

A beneficiary who is not a successor annuitant is in a different position. They receive a lump sum from the estate or plan, and the tax is on the deceased's final return. They can defer it only if they are a qualifying survivor who rolls over the refund of premiums. A joint designation on Form T1090 lets a qualifying survivor be taxed on RRIF amounts paid to the estate.

• Successor annuitant: the plan carries on and the spouse is taxed on later payments.
• Named beneficiary: a lump sum, with tax on the final return unless a qualifying survivor rolls it over.
• Estate: amounts paid to the estate are reported on box 22, and the tax question depends on whether a joint designation applies.

If the fund's value changes after death

A RRIF can rise or fall in value between death and the final payout. If the plan falls in value, the legal representative can ask that the decrease be carried back and deducted on the final return, using Form RC249 and a reassessment. In the CRA's example, a fair market value of $185,000 at death and $150,000 actually received produces a $35,000 deduction.

There are limits. The deduction 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 this case by case. No deduction is available when the amount was never included in the deceased's income, for example where the full amount went to the spouse. 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.

What to do next

• Ask the RRIF carrier for the T4RIF slips and confirm which boxes are filled in.
• Find out whether a spouse or common-law partner is named as successor annuitant.
• Record the fund's value at the date of death and the amounts later paid out.
• Note the date of the final distribution, since timing affects any decrease-in-value claim.
• Have an accountant or lawyer review the final return before it is filed.

Because the way payments made before death are reported depends on the plan and the slips issued, it is worth confirming the details with a lawyer or accountant before filing.

Frequently asked questions