RRIF and Pension Rollover to a Surviving Spouse in Ontario

A RRIF is what many RRSPs turn into in retirement, so it is common for a surviving spouse to inherit one. The rules are not the same as for an RRSP, and the key difference is who is named on the contract or in the will.

This article explains the successor annuitant route, what happens without one, and how to approach a pension. Details turn on the specific documents, so a lawyer or accountant can confirm your situation.

The successor annuitant route

If the RRIF contract or the will names the spouse or common-law partner as successor annuitant, the deceased is not taxed on the RRIF value. The RRIF simply continues, and the survivor reports the payments.

This is usually the smoothest result because there is no large lump sum to report and no transfer to rush. It depends on the naming being in place, so checking the contract is the first step.

The wording matters. The rule applies where the RRIF contract or the will names the spouse or common-law partner as successor annuitant. If your spouse was named in some other way, the result may be different, so it is worth asking the institution exactly how the account is set up and confirming with an accountant or lawyer.

What happens without a successor annuitant

Without a successor annuitant, the RRIF's fair market value is included in the deceased's income and shown in box 18 of the T4RIF. That can create a substantial tax bill on the final return.

There is still a way to soften it for a spouse. A spouse who receives a designated benefit can transfer it to their own RRSP, RRIF or annuity within the year or 60 days after it ends. Form T1090 is used where payments go to the estate.

A separate age rule applies to an RRSP refund of premiums. To transfer a refund of premiums into an RRSP, the survivor must be 71 or younger at the end of the year of transfer, and older survivors can use a RRIF or annuity instead.

For an RRSP refund of premiums, the survivor includes the transferred amounts on line 12900, deducts transfers to an RRSP on line 20800, and deducts transfers to a RRIF or annuity on line 23200. How RRIF amounts are reported depends on the details, and the lines and forms are easy to mix up, so an accountant can help prepare the return.

How a RRIF differs from an RRSP

Pensions and other income

A workplace pension is different from a RRSP or RRIF because it is governed by the plan's own terms. Whether a survivor benefit exists, how much it pays and whether it is paid for life depends on the plan, so ask the plan administrator for the survivor options in writing.

Capital property such as investments can also pass to a spouse on a tax-deferred basis. If capital property passes to a surviving spouse or common-law partner resident in Canada, the deceased is deemed to sell at adjusted cost base and the survivor takes over the deceased's cost. The legal representative can elect out of that rollover property by property.

Without a rollover, a person is deemed to have disposed of capital property at fair market value immediately before death. For the spousal rollover, the property must be locked in for the spouse or trust no later than 36 months after death, and a written extension request can be made to the Tax Services Office before the 36 months end.

A will can also leave property to a testamentary spousal trust. The trust must be created by the will, the spouse must be entitled to all trust income arising before their death, and no one else may receive or use trust income or capital during the spouse's lifetime. A trust that does not meet the conditions does not get the rollover. Because the wording of the will decides this, it is worth having a lawyer review it.

What to do next

• Locate the RRIF contract and check whether a successor annuitant or beneficiary is named.
• Check the will for any naming of the spouse as successor annuitant.
• Ask the institution how it will report the RRIF, for example on a T4RIF.
• Diarize the transfer window: the year of receipt plus 60 days after it ends.
• Request written survivor options from any pension plan administrator.
• Speak with an accountant about the final return and a lawyer about the estate.

Frequently asked questions