Death of a RRIF Annuitant

RC4178(E) Rev. 06

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Table of Contents

• General rule - deceased annuitant
• General rule - beneficiaries of the RRIF
• Optional reporting
• Qualified beneficiaries - transfers

This information sheet explains the taxation of registered retirement income fund (RRIF) amounts when the annuitant dies. It explains how they are reported, and the options that are available to reduce or defer the tax liability resulting from the annuitant's death. A RRIF annuitant is the owner of a RRIF.

The following chart shows how the RRIF carrier generally prepares the slips that report the amounts paid out or considered to have been received from a deceased annuitant's RRIF.

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General rule - deceased annuitant

When the annuitant of a RRIF dies, he or she is considered to have received, immediately before his or her death, an amount equal to the fair market value of all the property held in the RRIF at the time of death. This amount, and all other amounts the annuitant received in the year from the RRIF, have to be reported on the annuitant's return for the year of death.

A beneficiary will not have to pay tax on any payment made out of the RRIF if it can reasonably be regarded as having been included in the annuitant's income.

Exception (spouse or common-law partner as successor annuitant) - We do not consider the deceased annuitant to have received an amount at the time of death if the RRIF contract or the annuitant's will names his or her spouse or common-law partner as the successor annuitant of the RRIF. If this occurs, the RRIF continues and the spouse or common-law partner becomes the annuitant. All payments made out of the RRIF after the date the annuitant died become payable to that successor annuitant. The successor annuitant will receive a T4RIF slip for the year of death (if applicable) and for future years showing the payments he or she received. The payments have to be reported on the successor annuitant's return for the year in which they are received.

If the spouse or common-law partner is not named as the successor annuitant, he or she can still be considered as such if the annuitant's legal representative consents to the designation and the RRIF carrier agrees. For common-law partners of the same sex, this only applies if the annuitant died after 1997.

• the spouse or common-law partner is named in the RRIF contract as the sole beneficiary of the RRIF; and
• the spouse or common-law partner instructs the RRIF carrier to transfer directly, before December 31 of the year following the year of death, the entire eligible part of the RRIF property to an eligible registered plan or fund, or to an issuer to buy an eligible annuity. For more information on eligible transfers, see "Qualified beneficiaries - transfers."

If these conditions are met, only the spouse or common-law partner will receive a T4RIF slip. The total amount that was paid out of the RRIF will show in box 16 of the slip, and the part that was transferred will show in box 24 of the slip. The amount shown in box 16 has to be reported on line 115 of the spouse's or common-law partner's return for the year the transfer was made. The spouse or common-law partner will receive an official receipt for the amount that was transferred. For information on how to claim a deduction for the transfer, see "Qualified beneficiaries - transfers."

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General rule - beneficiaries of the RRIF

Amounts paid from the RRIF that represent income earned in the RRIF after the date the annuitant died have to be reported by the beneficiaries named in the RRIF contract or the annuitant's estate (if no beneficiary is named). These payments have to be included in the income of the beneficiaries or the estate for the year they are received. Chart 1 shows how to prepare the slips that report payments of income earned in a RRIF after death.

Optional reporting

Read this section if neither of the exceptions in the section called "General rule - deceased annuitant" applies.

If a qualified beneficiary receives an amount from a deceased annuitant's RRIF that qualifies as a designated benefit, the annuitant's legal representative can claim a reduction of the amount the annuitant is considered to have received at the time of death. The reduction, which is determined by completing Chart 2, allows for a redistribution of the annuitant's income to the qualified beneficiary who actually received it. This redistribution of income allows the legal representative and the qualified beneficiary to arrange their affairs, resulting from the death of the annuitant, in such a way as to pay the least amount of tax the law allows.

If none of the payments out of the RRIF is made to a qualified beneficiary or designated as a designated benefit, the amount the annuitant is considered to have received at the time of death cannot be reduced.

A qualified beneficiary includes the deceased annuitant's spouse or common-law partner. It also includes a financially dependent child or grandchild of the deceased annuitant if the death occurred:

• in 1999 or later;
• in 1998, and the annuitant had no spouse or common-law partner at the time of death;
• in 1998, and the annuitant had a spouse or common-law partner at the time of death, and an election was filed to treat the child or grandchild as a qualified beneficiary (for more information on this election, visit our Web site, or contact us at 1-800-959-8281);
• in 1996 or 1997, and the annuitant had a spouse at the time of death, and an election was filed to treat the child or grandchild as a qualified beneficiary (for more information on this election, visit our Web site, or contact us at 1-800-959-8281); or
• from 1993 to 1997, and the annuitant had no spouse at the time of death.

A designated benefit out of a RRIF includes any of the amounts shown in the shaded areas of Chart 1 if paid to a qualified beneficiary. If these amounts are paid to the annuitant's estate, they will qualify as a designated benefit if the following conditions are met:

• a qualified beneficiary is a beneficiary of the annuitant's estate; and
• the annuitant's legal representative and the qualified beneficiary jointly file Form T1090, Death of a RRIF Annuitant - Designated Benefit, to designate all or part of the amounts paid to the estate as a designated benefit received by the qualified beneficiary.

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Qualified beneficiaries - transfers

When a qualified beneficiary includes a designated benefit in income, he or she can defer paying tax on the eligible part of it by transferring it to an eligible registered plan or fund, or to an issuer to buy an eligible annuity. To determine the eligible part of a designated benefit, which is the amount that can be transferred, complete Chart 3. The following chart shows which transfers different qualified beneficiaries can choose.

Designated benefit paid to:	Can be transferred to:
	RRSP *	RRIF	Annuity
the annuitant's spouse or common-law partner
the annuitant's financially dependent child or grandchild who was dependent because of a physical or mental infirmity
the annuitant's financially dependent child or grandchild who was dependent but not because of a physical or mental infirmity			**
* The qualified beneficiary must be 69 years of age or younger at the end of the year the transfer is made. ** The annuity can provide for payments based on a period of not more than 18 years minus the child's or grandchild's age at the time the annuity was purchased. The payments from the annuity have to begin no later than one year after the purchase.

The transfer or purchase has to be completed in the year the designated benefit is received or within 60 days after the end of the year. The carrier or issuer who receives the transferred funds will issue an official receipt to the qualified beneficiary. The beneficiary can use the receipt to claim a deduction on his or her return for the year the designated benefit was received. The following chart shows where on the return the beneficiary should claim the deduction.

Designated benefit transferred to:	Claim deduction on:
	line 208	line 232
an RRSP
a RRIF
an annuity

Chart 2 - How to calculate the reduction of the amount the deceased annuitant is considered to have received at death									Using previous example
Complete a separate calculation for each RRIF belonging to the deceased annuitant.
1.	Enter the amount shown in box 18 of the T4RIF slip issued to the annuitant for the year of death.					$	1					$	150,000	1
2.	Enter the FMV of the RRIF on the later of the following dates (you may need to contact the deceased annuitant's RRIF carrier to determine these amounts): December 31 of the year following the year the annuitant died; or the end of the day the last time a designated benefit was paid out of the RRIF.					$	2					$	0	2
3.	Enter the total of all amounts paid out of the RRIF after the annuitant died.				+	$	3		+			$	165,000	3
4.	Add lines 2 and 3.				=	$	4		=			$	165,000	4
5.	Enter the amount from either line 1 or line 4, whichever is less.				-	$	5		-			$	150,000	5
6.	Line 4 minus line 5.				=	$	6		=			$	15,000	6
7.	Enter the total of the following amounts: amount designated as a designated benefit on each Form T1090 filed for the RRIF; the part of the amounts shown in box 36 of all T4RIF slips and box 13 of all T5 slips issued in the name of the estate that the qualified beneficiaries are entitled to receive from the estate; amounts shown in boxes 16 and 22 of all T4RIF slips and box 13 of all T5 slips issued to qualified beneficiaries; the part of the amount shown in box 36 of all T4RIF slips that were issued to the qualified beneficiaries that is not required to be included in income (contact the deceased annuitant's RRIF carrier to determine these amounts); and the part of the amount shown in box 18 of the T4RIF slip that was issued to the deceased annuitant for the year of death and that the qualified beneficiaries are entitled to receive.					$	7					$	165,000	7
8.	Enter the result of the following calculation:
	1-	(	$_______(amount from line 6) ÷ $_______(amount from line 4)	)	×		8		×				0.909091 *	8
9.	Maximum reduction of the amount the deceased annuitant is considered to have received at the time of death (line 7 multiplied by line 8). The reduction can be any amount, from zero to the amount on this line.				=	$	9		=			$	150,000	9
If the reduction is claimed in the year the annuitant died, the legal representative has to attach a letter to the annuitant's return for that year to explain how the amount included in income was calculated. If the reduction is claimed after the year of death, the legal representative has to write us a letter requesting an adjustment to the annuitant's return for the year of death.									* Calculation of line 8
									1	-	(	$ 15,000 ÷ $ 165,000		)