How RRSP and RRIF Income Is Reported on the Final Return in Canada

When someone dies holding an RRSP or RRIF, the tax result can be large. Unless a rollover applies, the whole value of the plan can land on the final tax return in one year, even if no money has been paid out yet.

This article explains the default rule, how the amounts are reported, the main rollover options, and what happens to growth after death. Your situation may involve more detail, so a lawyer or accountant can confirm how it applies to you.

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

The default rule for an RRSP

For an unmatured RRSP, the deceased is treated as having received the fair market value of all the plan property just before death. The amount shown in box 34 of the T4RSP goes on line 12900 of the final return.

This is a deemed receipt. The plan does not have to be cashed out for the income to be reported. That is why the tax can be a surprise to families who expected the money to pass to beneficiaries untouched.

How a RRIF is treated

For a RRIF, the fair market value, shown in box 18 of the T4RIF, is included in income unless the spousal conditions are met.

Payments the deceased received from the RRIF before death are reported separately, on line 11500 if the person was 65 or older, or on line 13000.

If a spouse or common-law partner is named as successor annuitant in the contract or will, they become the annuitant and keep getting payments. Without a written election they can still become the annuitant if the legal representative consents and the carrier agrees.

Rollovers that can avoid the tax

• Spouse or common-law partner: if all plan property is transferred directly to the survivor's RRSP, RRIF, PRPP, SPP or an eligible annuity before the end of the year after death, no T4RSP is issued in the deceased's name. The survivor reports the payment and claims an offsetting deduction.
• Successor annuitant (RRIF): a spouse or common-law partner named in the contract or will becomes the annuitant and keeps getting payments.
• Financially dependent child or grandchild: a child or grandchild with an impairment in physical or mental function can be an eligible individual for a rollover to their RDSP, subject to contribution conditions.

Timing and the form of the transfer matter. A rollover generally depends on the money moving directly into the right kind of plan, so it is worth checking with the plan carrier and an accountant before anything is paid out.

Growth after death and later payments

Increases in value after death are income of the beneficiary or the estate when received, and a T4RSP or T4RIF is issued for them.

If the total distributions are less than the fair market value that was included in the deceased's income, the legal representative can request that the difference be deducted on the final return. The final distribution must be made by the end of the year after death.

The legal representative can also contribute to the surviving spouse's RRSP in the year of death or within 60 days after the year-end. The survivor and legal representative can jointly elect to treat amounts from a matured RRSP paid to the estate as paid to the survivor.

What to do next

• Get the plan statements and the fair market value at the date of death.
• Find out who is named as beneficiary or successor annuitant.
• Confirm whether a direct transfer to a survivor's plan is possible before the end of the year after death.
• Notify the CRA of your role as legal representative before accessing the deceased's tax records.
• Have an accountant or lawyer review the final return, including the T4RSP or T4RIF slips.

Because the default rule can create a large tax bill, speak with a lawyer or accountant before distributing plan money. A legal representative who distributes property without a clearance certificate can be personally liable, up to the value distributed.

Frequently asked questions