RRIF upon death of spouse

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miguel
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RRIF upon death of spouse

Post by miguel »

Simple question

I need clarification

when it happens does the RRIF simply get transferred over to the surviving spouse (whom is already named as beneficiary in the will of the dead spouse)

or

does it form part of the estate of the deceased and the TAX MAN gets his cut right away?

thanks for your help
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AltaRed
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Re: RRIF upon death of spouse

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If an RRSP (or a RRIF) has named the spouse as beneficiary, it will be rolled over (transferred) to the spouse as a RRSP/RRIF upon direction of the Executor. There are no income taxes due, i.e. the RRSP/RRIF is not collapsed and the surviving spouse becomes owner and it can happen before Probate.

If the RRSP (or a RRIF) names the beneficiary as the Estate, the FI will collapse the RRSP/RRIF into an Estate account as directed by the Executor. There may, or may not, be withholding taxes witheld at source (have not had this situation so don't know if there is a source withholding of 15% or whatever - I speculate not). If there is no named beneficiary at all, i suspect the FI will simply freeze the account until Probate is obtained. In either event, the estate is responsible for the income taxes to be paid upon collapse of the RRSP/RRIF and those taxes (other than any withheld at source upon collapse of the RRSP/RRIF) are due and payable on the Final T1 tax return.

These things happen regardless of who the beneficiaries of the estate are. If the surviving spouse is the beneficiary of the estate she will eventually get the funds, net of income taxes due.

Added: Found a few paras in this reference http://theexcellentadvisor.com/trs_RRIFrrsp_faq.pdf where IF the RRSP/RRIF named the Estate as beneficiary, and the surviving spouse is the beneficiary of the Estate, then there is a possiblity of a joint election that might make the funds available to the surviving spouse sooner than after probate.
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miguel
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Re: RRIF upon death of spouse

Post by miguel »

thanks

just as I thought and you confirmed it

I spoke to a bank employee who was unsure

i guess the key here is 'who is the beneficiary, the surviving spouse or the estate?

from a tax angle in the final analysis it is a matter of 'render to Caesar'
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Re: RRIF upon death of spouse

Post by twa2w »

To add
A rrif can have a beneficiary or a successor annuitant designation. They are slightly different.
With beneficiary, the beneficiary can chose to take cash and pay tax or can roll over into a riff in their name. IIRC with this designation, the minimum payment for the year must be on the deceased person tax return

A successor annuitant means the RIFF stays as is ( payments Etc), but name changes to successor annuitants name and payments continue but to the new owner. With this, rrif payments to date of death go to deceased reurn and payments after go to successors tax return.

If the beneficiary designation is in the will only, there is a rollover provision inthe income tax act where the RIF or RSP can be rolled over to the spouses RIF or RSP. there is some paperwork involved. Or the beneficiary can take the cash and the estate pays the tax.
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Re: RRIF upon death of spouse

Post by miguel »

thanks

this had made it even clearer

our wills stipulate that each spouse is the beneficiary of the other
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AltaRed
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Re: RRIF upon death of spouse

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twa2w wrote: 19 Oct 2017 13:35 If the beneficiary designation is in the will only, there is a rollover provision inthe income tax act where the RIF or RSP can be rolled over to the spouses RIF or RSP. there is some paperwork involved. Or the beneficiary can take the cash and the estate pays the tax.
Right. Forgot about that one where the will specifically states the beneficiary of the RRSP/RRIF is the surviving spouse. But as I understand it, that is the specific instance. If the RRSP/RRIF states the Estate is the beneficiary, and the Will is silent on RRSP/RRIF designation, then that is a conflict. I forget what happens in a conflict, i.e. RRSP/RRIF states Estate is beneficiary and Will says spouse is beneficiary....think it depends on 'latest date' of the beneficiary form for the RRSP/RRIF and the date of the Will.

Added: Point is there are a number of permutations depending on specific wording.
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Re: RRIF upon death of spouse

Post by twa2w »

Yes, best to have beneficiaries directly on the RSP as well.

Rules vary by province as to what over rides what in the event if RSP ststes a beneficiary and the will states specifically the RSP should go to someone else..
A general beneficiary designatiin in a will, will not over ride a direct designation on the RSP.
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Re: RRIF upon death of spouse

Post by twa2w »

AltaRed wrote: 19 Oct 2017 13:41
twa2w wrote: 19 Oct 2017 13:35 If the beneficiary designation is in the will only, there is a rollover provision inthe income tax act where the RIF or RSP can be rolled over to the spouses RIF or RSP. there is some paperwork involved. Or the beneficiary can take the cash and the estate pays the tax.
Right. Forgot about that one where the will specifically states the beneficiary of the RRSP/RRIF is the surviving spouse. But as I understand it, that is the specific instance. If the RRSP/RRIF states the Estate is the beneficiary, and the Will is silent on RRSP/RRIF designation, then that is a conflict. I forget what happens in a conflict, i.e. RRSP/RRIF states Estate is beneficiary and Will says spouse is beneficiary....think it depends on 'latest date' of the beneficiary form for the RRSP/RRIF and the date of the Will.

Added: Point is there are a number of permutations depending on specific wording.
Yes it can get confusing. Even if the RSP names the estate, if the will just generally names the spouse, I believe the rollover provisions apply. If there are multple beneficiaries under the will, it gets trickier and may depend on the size of RIF versus the size of the spouses share. And then tax implications may come into play.
Different provinces seem to have different rules so not clear cut for sure.
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