Financial Planning, Taxes, Wealth Planning, RRIF

RRIF transfer to spouse on death

Sep 21, 2017

While a Registered Retirement Income Fund (RRIF) is generally fully taxable on death, it is possible for spouses (including common-law partners) to leave RRIF assets to one another on death in a way that defers taxes.

Here is an overview of how this tax-deferred transfer might be achieved, using as an example the situation of two Canadian residents: Lee, who recently died, leaving a spouse, Casey.

If the spouse is designated as the “successor annuitant” in the plan document


If Casey was named as a successor annuitant on Lee’s RRIF, only the RRIF income Lee received during the year would be included in the final return. Casey would essentially step into Lee’s shoes with respect to the RRIF so Casey would receive the ongoing RRIF payments and be required to receive the balance, if any, of the year’s RRIF minimum income.

If the spouse is designated as the “beneficiary” in the plan document


The position of Canada Revenue Agency (CRA) is that if Casey is the sole beneficiary in the RRIF contract and the entire eligible amount of the RRIF is directly transferred to Casey’s Registered Retirement Savings Plan (RRSP) or RRIF (or used to buy an eligible annuity) by December 31st of the year following Lee’s death, the value of the RRIF would be included in Casey’s tax return for the year of the transfer, not in Lee’s final return. Casey could then claim a corresponding special deduction for the eligible amount, so no taxes would be payable on that part.

The eligible amount in general is the full value of the RRIF, less the RRIF minimum for the year of the transfer to the extent it was not already paid to Lee in that year. Accordingly, some or all of the RRIF minimum may have to be included in Casey’s income.

If the specific criteria of CRA’s position are not met, Lee’s executors must include the value of the RRIF in Lee’s final return. However, Lee’s executors could decide to claim a deduction on Lee’s final return up to the RRIF amounts actually paid to Casey. That amount would then be taxable to Casey in the year the payments were made. To reduce the resulting taxes, Casey could make special RRSP/RRIF contributions up to the eligible amount, provided they are made in the year of a payment from Lee’s RRIF or within the first 60 days of the next calendar year.

If the spouse is not designated as the RRIF successor annuitant or beneficiary


If the RRIF is designated to the estate, or if there is no valid successor annuitant or beneficiary designation, or if making a designation is not possible (often the case in Quebec), the executors will hold and control the RRIF assets as part of the estate.

If both Lee’s executors and the RRIF carrier consent, Casey can become the successor annuitant to achieve the tax-deferred rollover.

Alternatively, if Casey is a beneficiary under Lee’s will, another opportunity exists to achieve a tax-deferred transfer of Lee’s RRIF:

  1. Lee’s executors must file a joint election with Casey designating an amount of Lee’s RRIF to be taxed on Casey’s return for the year the funds were paid to Lee’s estate, rather than on Lee’s final return.
  2. To get a deduction against the income inclusion stemming from the joint election, Casey could make the special RRSP/RRIF contribution up to the eligible amount, provided it is made in either the year of the RRIF payment to the estate or the first 60 days of the next calendar year.

Key differences


Naming a successor annuitant

  • Simpler to administer
  • Provides an automatic rollover, which may limit planning and/or provide more certainty as to the end result

Designating a beneficiary

  • The surviving spouse and the executor must undertake steps to achieve a rollover
  • Allows enhanced planning, as there is flexibility for some, all or none of the RRIF value to instead be taxed on the deceased’s final return

No designation of successor annuitant or beneficiary

  • Can enable enhanced planning and certainty regarding the tax outcome provided the executor takes the necessary steps and the will is drafted appropriately

You should review your situation and objectives with your financial advisor and tax and legal advisors to determine the most appropriate planning for your retirement plans, including the choice of executors.