RRSPs and RRIFs -> Taxes on RRSPs and RRIFs at death
Wills and Estates -> Taxes on RRSPs and RRIFs at death

How are RRSPs and RRIFs taxed at death?

The general rule for an RRSP or RRIF is that the value of the RRSP or RRIF at the date of death is included in the income of the deceased for the tax return for the year of death.  However, income tax may be deferred if the beneficiary of the RRSP, RRIF, or estate is:

1. the spouse or common-law partner

2. a financially dependent child or grandchild under 18 years of age, or

3. financially dependent mentally or physically infirm child or grandchild of any age.

In order for the tax to be deferred, the RRSP or RRIF must be transferred to the RRSP, RRIF, or eligible annuity of the beneficiary before December 31st of the year following the year of death.  Other conditions also apply.

The Federal 2010 Budget proposes to also allow a rollover of a deceased individual's RRSP proceeds to the Registered Disability Savings Plan (RDSP) of a financial dependent infirm child or grandchild.  This is effective for deaths occurring on or after March 4, 2010.

References:

Tax tip:  Make sure your RRSP or RRIF named beneficiary is up to date.

Revised: June 16, 2010