RRSP and RRIF Tax After Death: What Manitoba Families Should Expect

An RRSP or RRIF can be one of the largest assets a person leaves behind, and it is often the one families understand least. Questions come up quickly: Is the money taxed? Who pays? Does it matter that someone was named on the plan?

This article explains how registered plans fit into the wider estate process in Manitoba, what deadlines and protections apply to the executor, and where the answer depends on facts a lawyer or accountant should confirm.

This article covers the law of Manitoba.

Registered plans and the final tax return

When someone dies, a final income tax return is filed for them. Who is responsible for filing the return depends on your situation, so it is worth confirming with a lawyer. Registered plan balances are one of the items an accountant will look at when preparing that return.

How much of a plan is reported, and on whose return it is reported, depends on the type of plan, who is named on it and the family relationship involved. Ask an accountant to confirm whether a rollover is available in your situation before anyone withdraws money.

Filing and payment deadlines

The Canada Revenue Agency sets the due date for the final return based on when the person died, and the date can differ if the deceased or their spouse or common-law partner was running a business. The deadlines are below.

• Death between January 1 and October 31: file and pay by April 30 of the following year.
• Death between November 1 and December 31: file and pay within 6 months of the date of death.
• If the deceased or their spouse or common-law partner was running a business, filing is due June 15 of the following year for deaths between January 1 and December 15, and the payment deadline does not change.

Missing these dates can add cost to the estate, so it helps to involve an accountant early, especially when registered plans are involved.

Protecting the executor: clearance certificates

The CRA says the legal representative should obtain a clearance certificate before distributing assets. If assets are distributed without one while tax is still owing, the representative can be personally liable up to the value of the assets distributed.

Notice to creditors is a separate protection. A personal representative who publishes the required notice in The Manitoba Gazette and a local newspaper may distribute after the notice period and is not liable for assets given to someone whose claim they did not know about at the time. That protection does not stop creditors from following estate proceeds into the hands of recipients, and it does not apply to heirs, next of kin or legatees claiming as such. Debts must be covered before will beneficiaries inherit.

Named beneficiaries, spouses and Manitoba's Family Property Act

Many registered plans name a person to receive the money directly. Whether a plan passes by that designation or through the estate affects who receives it and how quickly. Check the plan documents and ask the financial institution for the current designation.

Manitoba's Family Property Act can also matter. When a survivor claims an accounting and equalization on death, registered plans payable to others are counted among the deceased's assets, to the extent no adequate consideration was received. The survivor's own assets are exempt from the accounting, including registered plans payable to the survivor. These rules apply to married spouses and equally to common-law partners.

• Only the survivor may apply for the accounting and equalization, not the deceased's personal representative.
• The survivor's time limit is six months from the grant of probate or letters of administration.
• The personal representative must serve the survivor with a prescribed notice within one month after the grant, and must not distribute the estate until the survivor consents in writing, the time to apply has passed or an application is decided.

A common-law partner has the same intestate share as a spouse. Separation can change this, so whether a survivor counts as a spouse or partner for these purposes may depend on the facts.

What to do next

• Order certified death certificates. Vital Statistics charges $30.00 for each certificate or certified copy.
• Collect statements for every RRSP and RRIF, and ask each institution who is named on the plan.
• Ask an accountant whether any rollover is available and how the plans affect the final return.
• Note the filing deadline that matches the date of death.
• Apply for a clearance certificate before distributing assets.
• If a surviving spouse or common-law partner may be affected, get legal advice about the Family Property Act time limit before distributing the estate.

A lawyer can confirm how the plan designations and the Family Property Act fit together in your family's situation, and an accountant can confirm the tax result.

Frequently asked questions