What happens to an RRSP or RRIF when a spouse dies?
By Krystian Urbanski, CIM, CIWM, FCSI, PFP · Chief Retirement Strategist, RetirementIQUpdated · 3 min read
If you are the surviving spouse or common-law partner, your partner’s RRSP or RRIF can usually move to you tax-deferred, either by continuing a RRIF as successor annuitant or by transferring the funds to your own RRSP or RRIF. If the estate or someone else is the beneficiary, the full value is generally taxable on the deceased’s final return.
The spousal rollover
Normally, when someone dies, their RRSP or RRIF is treated as if it were cashed out the moment before death, and the full value is taxed on their final return. The big exception is a surviving spouse or common-law partner, who can receive the money and defer the tax.
- Successor annuitant (RRIF): the surviving spouse simply takes over the RRIF and its payments. Nothing is taxed at death; the survivor pays tax on future withdrawals. This is usually the simplest route.
- Named beneficiary: the spouse receives the funds and transfers them to their own RRSP (if 71 or younger), RRIF or an annuity. A refund of premiums must be transferred in the year received or within 60 days after the end of that year.
- Estate as beneficiary: a rollover may still be possible if the spouse inherits through the will, but it is more complicated, slower and can expose the funds to probate.
When there is no spouse
The plan’s value is generally taxable on the deceased’s final return, even if it is paid to children. A financially dependent child or grandchild may be able to defer tax, including by rolling into an RDSP if the dependence is due to a disability. In a blended family, who pays that tax, the estate or the beneficiary, can become a real fairness issue.
What surviving spouses should do first
- Ask the financial institution what designation is on file.
- Do not cash out; ask for a transfer or successor-annuitant change.
- Keep the death certificate and the deceased’s SIN handy; the executor files the final return.
- Review your own beneficiary designations, which may still name your late spouse.
When Frank died with a $350,000 RRIF naming his wife Linda as successor annuitant, the RRIF simply became hers. No tax was due on his final return. If Frank had named his estate instead, $350,000 would have been added to his final-year income, costing close to half of it in tax at Ontario’s top rate before his estate was divided.
What to do next
- Check the designation on every RRSP, RRIF, pension and TFSA.
- Name your spouse as successor annuitant on RRIFs where appropriate.
- In a blended family, decide in writing who bears the tax on registered accounts.
- Keep a list of accounts and designations in your Red Folder.
Free tools that help
Related questions
Is there a deadline to transfer my late spouse’s RRSP?
For a refund of premiums paid to you as beneficiary, the transfer to your own RRSP, RRIF or annuity must happen in the year you receive it or within the first 60 days of the next year. Your financial institution and the executor can help with timing.
What is the difference between a successor annuitant and a beneficiary?
A successor annuitant (a spouse only) takes over the RRIF as it is, and the payments simply continue. A beneficiary receives the funds, and then a transfer must be made to defer tax.
Does a TFSA roll over to a spouse too?
Yes. If your spouse is named successor holder, the TFSA continues in their name tax-free and does not use their TFSA room.
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