How Is an RRSP or RRIF Taxed on a Deceased Person's Final Return in Canada?

If you are the executor of someone who held an RRSP or RRIF, the plan can be one of the largest items on the final return. How it is reported depends on who receives the money and how it is paid.

This article explains the general rule and the main exceptions under federal tax law. Each case turns on its facts, so confirm your situation with a lawyer or accountant before filing.

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

The general rule for an RRSP

For an unmatured RRSP, the deceased is treated as receiving 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 applies even though the money has not yet been paid out. It is why a large plan can create a large tax bill on the final return unless an exception applies.

How a RRIF is treated

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

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

Exceptions: spouses, partners and dependants

• RRSP rollover: if all the 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.
• RRIF successor annuitant: a spouse or common-law partner named as successor annuitant in the contract or will becomes the annuitant and keeps getting payments.
• No written election: the spouse can still become annuitant if the legal representative consents and the carrier agrees.
• RDSP rollover: a financially dependent child or grandchild with an impairment in physical or mental function can be an eligible individual for a rollover to their RDSP, subject to RC4460 contribution conditions.

Which exception fits depends on the plan documents and who the beneficiaries are, so check the contract and the will early.

Changes in value after death

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

Contributions to the survivor's RRSP and what to do next

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

• Get the plan statements showing the fair market value at death.
• Read the plan contract and the will for named beneficiaries or a successor annuitant.
• Note the deadline of the end of the year after death for rollovers and final distributions.
• Watch for the T4RSP or T4RIF slips and match them to the final return.
• Speak with a lawyer or accountant before choosing between a rollover and paying out to the estate.

Frequently asked questions