RRIF and TFSA on Death: Successor Holder or Beneficiary in Ontario?

When you hold a RRIF or a TFSA with your spouse in mind, the words on the account form matter. Naming someone as successor or as beneficiary can lead to different tax results and different timing.

Different words are used for different accounts. This article sets out how the RRIF rules work, then flags what to confirm for a TFSA and for probate, since those turn on your account documents.

Successor, beneficiary and why the words matter

A successor is someone who steps into your place and keeps the account going. A beneficiary is someone who receives the money when you die. The terms your financial institution uses can differ by account type.

For a RRIF, the tax rules use the term successor annuitant. For a TFSA, the terms and tax results depend on the account contract and the tax rules, so ask the institution for the exact wording of your plan.

RRIF: the successor annuitant route

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

Without a successor annuitant, the RRIF's fair market value is included in the deceased's income, shown in box 18 of the T4RIF. 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.

Comparing the two RRIF outcomes

Which route fits you depends on your other income, your estate plan and what else the final return includes. An accountant can model both.

If the plan is an RRSP instead of a RRIF

An RRSP that has not yet become a RRIF follows similar ideas with different details. If the spouse or common-law partner is the sole beneficiary and all the RRSP property is transferred to a plan for the spouse by December 31 of the year after death, the deceased is not taxed on the RRSP value, and the spouse reports the amount shown in box 18 of the T4RSP.

Otherwise, the deceased is considered to have received the RRSP's fair market value at death, reported on the final return. A legal representative can reduce this using Chart 2 where a qualifying survivor receives a refund of premiums.

• A surviving spouse or common-law partner can defer tax on a refund of premiums by transferring it to their own RRSP, PRPP, SPP, RRIF or eligible annuity.
• The transfer must be completed in the year received or within 60 days after the end of that year.
• To transfer into an RRSP, the survivor must be 71 or younger at the end of the year of transfer; older survivors can use a RRIF or annuity instead.
• Form T2019 applies where the refund of premiums is paid to the estate.

Probate and how fast the funds pass

Whether an account passes outside the estate, and how quickly the money reaches your spouse, depends on how the account is set up and on what the institution requires. Ask the institution in writing how a named successor or beneficiary is paid out and what documents it needs.

Payments that go to the estate follow the estate's timing instead. If the survivor is a married spouse who elects equalization, the 'Election of Surviving Spouse' form must be filed with the Estate Registrar for Ontario no later than six months from the spouse's death. If no election is filed, the survivor is deemed to take under the will or intestacy. If the survivor elects equalization, gifts to them in the will are deemed revoked unless the will expressly says the gifts are in addition.

When a married spouse dies, the survivor can claim half the difference in net family property under the Family Law Act, take what the will gives, or, if there is no will, take their share under the Succession Law Reform Act. A dependant may also ask the court for adequate support out of the estate if the deceased did not make adequate provision for their proper support. Time limits and exceptions for that kind of claim depend on the facts, so it is worth confirming them with a lawyer promptly.

Probate tax effects vary with the estate, so get an estimate from a lawyer rather than relying on a general rule.

What to do next

• Pull the latest RRIF and TFSA statements and any beneficiary or successor forms on file.
• Check whether your spouse is named as successor annuitant on the RRIF.
• Ask the institution how a TFSA successor or beneficiary designation is treated.
• Make sure your will does not conflict with the account forms.
• Ask a lawyer and an accountant to review the plan together, especially if the account is large.

Frequently asked questions