RRSP Paid to the Estate: Can a Spouse Still Roll It Over in Canada?

Sometimes an RRSP is paid to the estate, and the will then leaves everything to the surviving spouse. You may wonder whether the usual spousal rollover is gone because the money did not go to you directly.

It may not be. A joint election with the executor can let the income be taxed to you rather than on the deceased's final return, and this article explains how that works and where the limits are.

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

The problem when the estate receives the RRSP

When an RRSP annuitant dies, the CRA treats the annuitant as having received the fair market value of the plan immediately before death, and that amount is reported on the final return. If the estate is the beneficiary, the whole value is the deceased's income and the estate bears the tax.

That can reduce what you inherit as the spouse, so the election matters.

The joint election with the executor

A payment to the estate is a refund of premiums only if a qualifying survivor is a beneficiary of the estate and the legal representative and the survivor jointly file Form T2019. A spouse or common-law partner is a qualifying survivor.

Under s. 146(8.1) of the Income Tax Act, the legal representative and the individual jointly designate, in prescribed form, that a payment is a refund of premiums, and the designated amount is deemed received by that individual. The income is then taxed to the survivor instead of the final return, and the deceased's deemed amount is reduced by the refund of premiums paid to qualifying survivors.

For a RRIF paid to the estate, a joint designation on Form T1090 lets a qualifying survivor be taxed on the amounts.

Completing the rollover

Once the amount is treated as your refund of premiums, you include it in your income and can deduct it by transferring it to your own RRSP (line 20800 with Schedule 7) or to a RRIF, RDSP or annuity (line 23200).

• Complete the transfer in the year you receive the money or within 60 days after the end of that year.
• You can roll into an RRSP only if you are 71 or younger at the end of the year of the transfer.
• If you are past that age limit, you transfer to a RRIF or annuity instead.

If the designation is made directly in the contract or will and the whole plan goes to the spouse's RRSP or RRIF, or is otherwise rolled over, by December 31 of the year following the year of death, the deemed receipt does not apply at all. That exception is tied to a sole-beneficiary designation, so an estate payment may not fit it and may need the election route.

When shares are split or the amount shrinks

Where there is a surviving spouse and others, the spouse's share can be rolled over while the other beneficiaries' shares are included in the deceased's deemed income. Each recipient gets a T4RSP for their share.

If the plan falls in value after death, the legal representative can ask to carry the decrease back to the final return, but no such deduction is available where the amount was never included in the deceased's income, for example where the full amount was rolled to the spouse. Increases in value after death are taxed to whoever receives them.

Whether your own facts fit these rules depends on the will, the plan terms and who the beneficiaries of the estate actually are, so confirm with a lawyer or accountant.

What to do next

• Ask the executor how the RRSP or RRIF was paid and to whom.
• Confirm that you are a beneficiary of the estate under the will.
• Ask the executor to complete the joint form with you before the filing and transfer deadlines.
• Note your age at the end of the transfer year to choose the right receiving plan.
• Keep every T4RSP or T4RIF and transfer receipt for your tax return.
• Have a lawyer or accountant review the final return and your own return together.

Frequently asked questions