Last updated: July 11, 2024 | Reviewed by Stuart Dollar
Planning for what happens after death is never easy, but it’s an important part of ensuring our loved ones are taken care of. Learn what happens to your RRIF when you die, and your options for how it’s taxed at your death.
What happens to your RRIF when you die?
The value of your RRIF will be included as taxable income in your final tax return, unless you’ve named one of the following:
- a successor annuitant;
- your spouse or common-law partner as the beneficiary;
- your financially dependent child or grandchild as the beneficiary.
RRIF successor annuitant vs beneficiary: What’s the difference?
A successor annuitant can only be the spouse or common-law partner of the account owner, whereas a beneficiary can be anyone – a spouse, child, grandchild, etc. However, there’s another key difference:
- If you name a successor annuitant for your RRIF, they’ll take over the entire account when you die.
- If you name a beneficiary, they’ll receive the funds from your RRIF, and your account will be closed. You can name anyone as a beneficiary.
Keep in mind, most jurisdictions in Canada allow you to designate beneficiaries for your RRIFs. However, in Québec, you can name a beneficiary to a RRIF only for insurance contracts like insurance GICs and segregated funds. Québec doesn’t allow beneficiary designations on mutual funds, stocks, bonds and trust GICs held in a RRIF.
After you die, your estate is responsible for paying any taxes from a RRIF on your final tax return. However, certain exceptions may apply:
- If your spouse or common-law partner is a successor annuitant, they’ll take over the account. In this case, your executor will include on your final tax return only the amounts you took from your RRIF before you died. Your spouse or common-law partner will have to pay tax on the amounts they withdraw throughout the rest of the year. They’ll also be required to withdraw a minimum annual amount from the RRIF.
- If your spouse or common-law partner is a beneficiary, they can transfer the funds in your RRIF above the RRIF minimum for the year to their own RRSP or RRIF in a tax-deferred rollover. The RRIF minimum amount is not eligible for the tax-deferred rollover, and must be included as income in your final tax return. In this case, your spouse or common-law partner won’t have to pay tax on the amount they deposit to their RRSP or RRIF until they take withdrawals.
- If your beneficiary is a child or grandchild of yours, and was financially dependent on you at your death, there may be an opportunity to transfer the funds to them for their benefit. They also may be able to defer withdrawing the money. They’ll be taxed on whatever amount they withdraw. In this case, your estate is not responsible for paying taxes on the amount transferred.
Keep in mind, you also have the option to divide funds in your RRIF between beneficiaries (e.g. your spouse and children) and your estate. Connect with an advisor for more detailed information.
What happens when you’re the beneficiary of a RRIF (and you’re not the surviving spouse or common-law partner)?
You generally don’t pay tax on the amount you receive; the deceased owner’s estate pays this tax. However, if the estate can’t pay the tax, the CRA can require a recipient beneficiary to pay it – up to the amount you received.
If you have enough RRSP contribution room, you can deposit some or all the funds into your own RRSP. You can then claim a tax deduction for the amount you deposited. Connect with an advisor for more detailed information.
What’s the tax rate on a RRIF at death?
The entire value of your RRIF will be taxed as income (like interest or salary) in your final tax return after you die. The exact amount of tax depends on your marginal tax rate in the year of death. You may owe a lot in taxes if the balance of your RRIF and other income in the final year is large. This applies only if your estate is responsible for paying taxes on your RRIF. If you have a spouse or common-law partner as beneficiary or successor annuitant for your RRIF, or a financially dependent child or grandchild, you may be able to defer taxes by transferring the RRIF or RRIF money to them. See “exceptions”.
Are RRIFs subject to probate?
Probate is the legal process for validating a will. Your RRIF may not be subject to probate if you’ve named a successor annuitant or beneficiary. However, if you don’t name a beneficiary, or if you name your estate as a beneficiary, your RRIF may be subject to probate.
Probate applies to most provinces and territories except Quebec. Also, keep in mind that probate tax varies across provinces and territories. Learn more about how probate works.
This information is meant for educational and illustrative purposes only. Some conditions, exclusions and restrictions may apply.