- On a RRIF, naming your spouse or common-law partner as successor annuitant means you are not treated as receiving the RRIF's value at death, because the RRIF simply continues.
- A named beneficiary on a RRIF or RRSP generally means the full value is taxed on your final return, unless a qualifying survivor exception applies.
- Registered plans with a beneficiary designation are left out of the value used for Ontario's Estate Administration Tax.
When you set up or review a registered account, you are usually asked who gets it after you die. Two choices come up again and again: naming a beneficiary, or, on a RRIF, naming your spouse or common-law partner as a successor annuitant. They sound alike, but the tax and probate results can be quite different.
This article compares the two in plain terms for people in Ontario. Your plan documents and family situation matter a great deal, so use this as a guide to the questions worth asking your plan issuer and a lawyer or accountant.
What each choice means
A beneficiary designation tells the plan who is to receive the benefit payable on your death. In Ontario, the Succession Law Reform Act lets a plan participant designate a person to receive that benefit. A designation in a will only works if the will refers expressly to the plan, either generally or specifically. If you have made more than one, the last valid designation, whether in a will or on the plan form, controls to the extent they are inconsistent.
A successor annuitant works differently. Instead of the account being paid out, the RRIF carries on. If the RRIF contract or your will names your spouse or common-law partner as successor annuitant, you are not treated as receiving the RRIF's value at death, and your spouse becomes the annuitant and reports the payments they receive.
Side-by-side comparison
| Point | Successor annuitant (RRIF) | Named beneficiary |
|---|---|---|
| Who can be named | Spouse or common-law partner | The person you designate |
| What happens to the account | The RRIF continues with the spouse as annuitant | The plan pays out to the beneficiary |
| Tax on your final return | You are not treated as receiving the RRIF value | Generally you are treated as receiving the fair market value of the RRIF property |
| Who reports later payments | The spouse, as the payments are received | Designated beneficiaries report income earned after death |
If the plan administrator pays the person you designated, the administrator is discharged, and that person may enforce payment of the benefit.
How the tax works for a RRIF
With a named beneficiary and no successor annuitant, the deceased is generally treated as receiving the fair market value of all the property held in the RRIF at death. That can mean a large amount of income on one final return. Amounts paid to a qualifying survivor can be treated as a designated benefit, which reduces the amount taxed to the deceased, including amounts paid through the estate using joint Form T1090.
If your spouse or common-law partner was not named as successor annuitant, they can still become one if your legal representative consents and the RRIF carrier agrees. This is why it is worth checking the wording on your plan rather than assuming the paperwork reflects what you intended.
What about an RRSP?
For an unmatured RRSP, the annuitant is considered to have received, immediately before death, the fair market value of all property in the plan, and that amount is taxed on the final return. There is an exception where a spouse or common-law partner is the sole designated beneficiary and all the RRSP property is transferred directly to a qualifying plan for them by December 31 of the year after the year of death. In that case no RRSP amount is included on the deceased's return.
Amounts paid to a qualifying survivor can instead be a refund of premiums taxed to the survivor. Qualifying survivors are the spouse or common-law partner and a financially dependent child or grandchild. Income earned in the RRSP after death is taxed to the designated beneficiary or the estate, not to the deceased. Whether your RRSP issuer offers any option other than a beneficiary designation is something to ask the issuer directly.
Probate and what to do next
Naming a beneficiary also affects probate. The value used for Estate Administration Tax excludes registered plans, such as RRSPs, RRIFs and TFSAs, that have a beneficiary designation. Estate Administration Tax is $0 on estates of $50,000 or less, and above that it is $15 for every $1,000 (or part of $1,000) over $50,000. Keep in mind that tax savings are only one factor. Support claims by dependants can still reach designated assets.
- Get a copy of the current designation or successor wording from each plan issuer.
- Check whether your will refers expressly to the plan, and whether a later plan form conflicts with it.
- List who would be taxed on each account and whether a spousal or dependant exception could apply.
- Ask your accountant to estimate the final-return tax under each option.
- Review your choices after any marriage, separation, birth or death in the family.
Frequently asked questions
Is a successor annuitant the same as a beneficiary?
No. A successor annuitant takes over the RRIF so it continues, and the deceased is not treated as receiving its value at death. A beneficiary is paid the benefit, and the deceased is generally treated as receiving the RRIF's fair market value.
Can only a spouse be a successor annuitant?
The rules on successor annuitants refer to a spouse or common-law partner. Anyone else you want to benefit would be dealt with as a beneficiary.
Does a beneficiary designation keep the account out of probate?
Registered plans with a beneficiary designation are excluded from the estate value used for Estate Administration Tax. Whether a particular plan is paid directly depends on its terms, so confirm with the issuer.
What if I want to change my designation?
A later valid designation revokes an earlier one to the extent they are inconsistent. Use the issuer's current form and keep a copy, and ask a lawyer if your will and plan forms might conflict.
Sources
- Succession Law Reform Act, R.S.O. 1990, c. S.26, s. 51(1) — Ontario e-Laws
- CRA RC4177 – Death of an RRSP Annuitant — canada.ca
- CRA T4040 – RRSPs and Other Registered Plans for Retirement — canada.ca
- CRA RC4178 – Death of a RRIF Annuitant — canada.ca
- Ontario.ca – Estate Administration Tax — ontario.ca
Links go to official government, court and regulator pages. The law changes — confirm you are reading the current version.
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