What Happens to a Spousal RRSP When the Annuitant Dies?

When the person who owns a spousal RRSP dies, the plan does not simply pass quietly to the next person. Tax rules apply, and the result depends on who is named as beneficiary and how quickly the paperwork is done. If you are the surviving spouse, the contributor, or the executor, the steps and deadlines matter.

This article explains the general rules published by the Canada Revenue Agency (CRA) for an RRSP annuitant who dies. These are federal tax rules that apply to Ontario residents. Your own situation may involve a will, a beneficiary designation or other facts, so an estate lawyer and an accountant should review the details.

The starting point: deemed receipt at death

On death, the annuitant is considered to have received the fair market value of the RRSP immediately before death, and that amount is reported on the annuitant's final tax return. This is a tax rule, not a payout: the money does not have to be paid out for the amount to be reported.

In a spousal RRSP, the annuitant is the person who owns the plan, not necessarily the person who contributed to it. So the annuitant's final return is the starting point, unless a rollover applies.

When the spouse is the sole beneficiary

If a spouse or common-law partner is the designated sole beneficiary and all the RRSP property is transferred directly to a qualifying plan by December 31 of the year following the death, only the spouse receives a T4RSP. This is the common path for moving the money into the survivor's own retirement savings.

Whether the survivor is named on the plan as beneficiary, and whether the plan was set up so that the beneficiary is a sole beneficiary, is a question of the plan documents. Check the beneficiary designation with the financial institution as early as possible.

When the money goes to the estate

Sometimes the proceeds are paid to the estate instead, for example because no beneficiary was named. A refund of premiums to a qualifying survivor then requires the legal representative and the survivor to file Form T2019 together.

The transfer to the survivor's RRSP or RRIF must be completed in the year it is received or within 60 days after the end of that year. Because that window is limited, executors should note the date the funds are received as soon as they arrive, and confirm the tax result with an accountant.

Contributions after death

After death, the legal representative may contribute to the surviving spouse's RRSP in the year of death or within 60 days after the end of that year. No contributions can be made to the deceased's own plan.

This can matter if the deceased person had unused deduction room. Whether a contribution is available and how it affects the final return depends on the facts and is worth confirming with an accountant.

If the contributor is the one who has died and the annuitant is the survivor, the plan generally stays with the annuitant, who owns it. Whether any earlier contributions affect who is taxed on later withdrawals depends on the details of the plan, so it should be reviewed with an accountant.

What to do next

• Find the RRSP statements and the beneficiary designation as soon as you can.
• Confirm with the financial institution whether the spouse is named as the designated sole beneficiary.
• If the proceeds are going to the estate, plan for Form T2019 and the transfer deadline.
• Note December 31 of the year after death for direct transfers to a qualifying plan.
• Ask whether a contribution to the survivor's RRSP by the legal representative makes sense.
• Have an accountant review the final return, since the plan's fair market value is reported there.

An estate lawyer can help the legal representative with the will and the estate steps, and an accountant can handle the tax filings. Taking advice before moving the funds is safer than correcting mistakes later.

Frequently asked questions