RRSP Beneficiary and No Will: Who Gets the Money in Ontario

When someone dies without a will, families often assume everything is frozen until the estate is sorted out. An RRSP or RRIF can be different, because it may pay out directly to a person named on the plan.

This article explains who receives the money, how the plan is taxed on death, and what changes if no beneficiary was named. The answers depend on the plan documents and the family, so treat this as general information.

The beneficiary designation usually controls

Under the Succession Law Reform Act, a plan includes pension, retirement and profit-sharing arrangements as well as RRSPs and RRIFs. A participant may name a beneficiary by a signed instrument or by will, and a designation in a will works only if it expressly relates to a plan, generally or specifically.

That means a person with no will can still have a valid designation, if they signed one with the plan. When the plan administrator pays the person named in the latest designation made under the plan's terms, the administrator is discharged, unless it had actual notice of a later designation or revocation. The designated person may enforce payment.

• A later designation revokes an earlier one to the extent of any inconsistency.
• Revoking a will also revokes a designation made in that will.
• Revoking a designation does not bring back an earlier one.

The first step is to ask the financial institution what designation is on file and when it was last updated.

Who gets the money in different situations

Property passing by right of survivorship is outside the estate. The estate trustee holds in trust the property that does fall into the estate. Whether a particular plan pays outside the estate depends on whether a valid designation is on file, which is worth confirming with the plan administrator.

How an RRSP or RRIF is taxed at death

On the death of an RRSP annuitant before maturity, the annuitant is deemed to have received, immediately before death, a benefit equal to the value of the RRSP's property at death. CRA says this is the fair market value of all property in the plan at death, and it is reported on the final return for the year of death. For a RRIF, the amount included in the death income is the fair market value of the RRIF at death.

Who bears the tax in a particular case, and where it will be paid from, depends on the facts. Beneficiaries and the estate trustee should talk early about it, and it is worth confirming with an accountant or lawyer.

Income earned in the RRSP after death is included in the income of the designated beneficiaries or, if there is none, of the estate, for the year it is received. Beneficiaries are not taxed again on amounts reasonably regarded as already included in the deceased's income. For a RRIF, a T4RIF may be issued for growth between death and final payout, generally taxable to the beneficiary or estate.

Rollovers for a spouse or dependent child

A qualifying survivor is the deceased's spouse or common-law partner, or a financially dependent child or grandchild. A refund of premiums paid to a qualifying survivor can be deducted from the deceased's deemed income and taxed in the survivor's hands, and may be moved tax-deferred to the survivor's RRSP, RRIF, PRPP, SPP or an eligible annuity. The tax definition covers common-law partners, unlike intestacy law, where only married spouses inherit.

• A spouse who is sole beneficiary must move all RRSP property to a qualifying plan or annuity by December 31 of the year following the year of death.
• For a refund of premiums, the transfer must be made in the year received or within 60 days after the end of that year.
• The survivor must be 71 or younger at the end of the year of transfer to transfer to an RRSP.
• For a RRIF, a qualified beneficiary may transfer a refund of premiums to an RRSP only if 71 or younger, in the year received or within 60 days after year end.

If the refund of premiums is paid to the estate instead of directly to the survivor, it counts as a refund of premiums only if a qualifying survivor is an estate beneficiary and the legal representative and survivor jointly file Form T2019. This is one reason an estate beneficiary may want advice before the money is paid out.

What to do next

When there is no will and the plan has to go through the estate, someone needs legal authority to deal with it. If there is no will, the spouse or common-law partner usually has the first right to apply, followed by close adult relatives. The certificate of appointment is the document that gives authority to manage estate assets and pay debts.

• Contact the plan issuer and ask whether a beneficiary designation is on file.
• Request the plan's value at the date of death and any year-end statements.
• Note the rollover deadlines if a spouse or dependent child may be a qualifying survivor.
• Tell the person preparing the final return about every RRSP and RRIF.
• If the plan goes to the estate, speak with an estates lawyer about applying for a certificate of appointment.
• If the deceased had debts or was in financial difficulty, ask how creditors may affect the plan, since the answer depends on the facts and the plan type.

In bankruptcy, RRSP balances are exempt from seizure except for contributions made in the 12 months before bankruptcy. Whether creditors can reach a plan with a named beneficiary after death is a separate question, and a lawyer can confirm it.

Frequently asked questions