Who Pays Tax on a RRIF With a Named Beneficiary in Canada?

Many people assume that naming a beneficiary on a RRIF moves the tax to that person. In general, the tax rules work differently from the paperwork that decides who receives the money.

This article explains who is taxed on a RRIF at death, the difference between a successor annuitant and a named beneficiary, and how the tax can be shared or recovered. It is general information and does not replace advice on your facts.

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

The starting point: a deemed receipt on the final return

For a RRIF, the annuitant is deemed to have received, immediately before death, the fair market value of all RRIF property. That amount is shown in box 18 of a T4RIF and reported on the final return.

The statute says the same for the last annuitant of a RRIF: s. 146.3(6) deems the last annuitant to have received, just before death, an amount equal to the fund's fair market value at that time. In plain terms, the deceased person's final return is the usual place where the tax lands.

Successor annuitant versus named beneficiary

The key distinction is between a successor annuitant and a beneficiary. If a spouse or common-law partner is named successor annuitant in the RRIF, no deemed receipt applies on death. The RRIF continues, the spouse becomes the annuitant, and they are taxed only on the payments they later receive.

A spouse who is not named can still qualify if the legal representative consents and the carrier agrees.

What the beneficiary actually receives and reports

A RRIF beneficiary, as opposed to a successor annuitant, receives a lump sum from the estate or plan, and the tax is on the deceased's final return. The beneficiary can defer it only if they are a qualifying survivor who rolls over the refund of premiums.

A qualifying survivor is the deceased's spouse or common-law partner, or a financially dependent child or grandchild.

Amounts received after death are reported on slips. A named beneficiary or the estate sees them in box 22 of a T4RIF, a spouse or common-law partner's post-death income is in box 16, and amounts transferred to a qualifying plan appear in box 24.

How the tax is shared or recovered

There are a few ways the tax can be moved away from the final return. A spouse or common-law partner named as successor annuitant avoids the deemed receipt. A qualifying survivor who rolls over a refund of premiums can defer the tax. A joint designation on Form T1090 lets a qualifying survivor be taxed on RRIF amounts paid to the estate.

There is also a recovery rule. Under s. 160.2(2), a person who receives RRIF money that is not the annuitant is jointly and severally liable with the last annuitant for the part of the year-of-death tax attributable to that amount. So beneficiaries can be pursued for the tax if the estate cannot pay.

How the estate and the beneficiary sort the cost out between themselves, for example whether the tax is deducted from the beneficiary's share, depends on the will, the plan documents and provincial law. A lawyer can confirm this.

What to do next

• Get a copy of the RRIF contract and the latest beneficiary or successor annuitant designation.
• Confirm whether a spouse or partner is named as a successor annuitant or only as a beneficiary.
• Ask the issuer for the T4RIF slips and note which boxes are used.
• Estimate the tax on the final return before distributing the money.
• Ask a lawyer or accountant whether Form T1090 or a refund-of-premiums rollover applies.

Slip box numbers and forms can change over time, so check the current CRA versions when you file.

Frequently asked questions