RRIF and RRSP Losses After Death

by Tax Guy - Burlington Accountant on August 10, 2009 Print This Post Print This Post

When the annuitant of a RRIF or RRSP dies the fair market value of the RRIF or RRSP right before death is included on their final tax return, unless there is a spouse or dependent minor who can take over the account tax-free.

There is often a time delay between the death of the annuitant and ultimate sale of the assets in the RRIF or RRSP. If there has been a decline in market value in the meantime, the tax bill could eat away a larger portion of the proceeds.

An Example

A person dies holding $150,000 worth of shares of XYZ Co. inside their RRIF. Six months later, when the shares are paid out, the fair market value had fallen 33% to $100,000.

Prior to 2009, this situation would have seen the full $150,000 included on the deceased’s income tax return despite the fact the estate only received $100,000. If the $150,000 were taxed at a marginal rate of 45%, the tax bill would have been $67,500 on proceeds of $100,000 ultimately received.

RRIF & RRSP Losses Following Death Allowed

To address this issue the federal government announced changes that allow the post-death decrease in market value in an RRSP or RRIF to be deducted from the value of the RRSP and RRIF at the time of death.

In the above example, the decrease in market value of $50,000 would be deducted and the tax bill reduced by $22,500 to $45,000.


The rule is in effect from January 2009 forward. And generally, this rule applies if the final distribution from the estate is made before the end of the year following the year of death but the CRA will evaluate and waive this condition on a case-by-case basis.

About The Tax Guy...

Dean Paley CGA CFP is a Burlington accountant and financial planner who services individuals and business owners locally, nationally and internationally. Dean has appeared in the National Post, Toronto Star and Metro News.

To find out more, visit Dean's website Dean Paley CGA CFP or connect via Twitter @DeanPaleyCGACFP.

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Beverly G February 26, 2010 at 2:07 am

Do you know what the tax implications would be for a nondependent daughter, named beneficiary – living in the United States who wants to redeem a RRIF and move the money to the U.S. Or would it be easier to put it into the estate and pay the necessary taxes that way.

Tax Guy February 26, 2010 at 11:53 am

@Beverly: The tax on death will occur regardless. It is more efficient to name the daughter as the beneficiary since the proceeds of the RRIF can be paid immediately.

Susie March 3, 2010 at 6:19 pm

In the event of Death-What is the difference between the income tax rate paid on the final personal tax and the estate tax rate? Are all RRIF’s considered part of the final personal income tax whether benefactors specifically named or not ie to estate? Thanks

Tax Guy March 4, 2010 at 9:19 am

@Susie: There is no estate tax in Canada. When you die, Canada considers you to have sold everything you own immediately before death. This results in a tax event: Your RRSP/RRIF is added to your income and any other investments are considered sold.

The RRSP/RRIF is paid directly to the beneficiaries and there is no tax withheld.

leona June 15, 2010 at 2:54 pm

my mother in law passed away in nfld-leaving her 5 children as designated beneficiaries from a rrif.she also left property to some not my husband.others. the estate now owes taxes. will my husband now
have to give back the money he inhereted. In her will
it says use real property to pay off debt.
please i need an answer.
thank you

Jeff September 18, 2010 at 2:08 pm

My dad passed away and left his RRSP’s to me and my sister, and the bank is claiming that we can only take the money as cash, and then pay the taxes on that money. Is this true or can we avoid paying high taxes by say, leaving the money in RRSP or ????

Tax Guy September 20, 2010 at 10:21 am

When your father passed away “he” was considered to have de-registered the account on the date of death and you and your sister were considered to have acquired it on the date of death. From the date of death forward, you and your sister are responsible for the income taxes.

The de-registration on death may or may not be taxable to you depending on whether the estate could pay the tax bill.

Charlene October 11, 2010 at 11:28 am

My father left a RRIF in my aunt’s name. The will goes to next of kin which is me and my 2 sisters. Who has to pay the taxes on the rrif? the rrif being about 83,000. thanks.

Tax Guy October 11, 2010 at 2:39 pm

The RRIF is taxed on your fathers final return. If the estate cannot pay, the aunt will be charged the proportional tax due on the RRIF received.

Jeff October 11, 2010 at 1:07 pm

As I understand, the estate will pay the taxes, so you will recieve the 83,000. If the estate does not have enough funds, then the estate will become bankrupt. Now at that point I am unsure if they can come after other family for that or not, but it was explained that the money you get is not touched. I am going through it now if I find out more I will pass it on.

Tax Guy October 11, 2010 at 2:42 pm

The go after the beneficiary of the RRIF.

Col October 26, 2010 at 4:28 pm

My question is regarding the RRIF of a deceased person going to the successor.

My question is….

When a person passes away and the RRIF is transferred to a successor, what is the protocol for the annual payment? If the scheduled payment is Dec. 31st, and the transfer is done in October, does the payment still happen in December for the successor, who then becomes liable for the income, or can the payment be made to the annuitant (the deceased), before the transfer of ownership to the successor?

Thank you!

Tax Guy October 27, 2010 at 8:36 am

Hello Col,

The successor annuitant simply takes over the payments. Therefore, the annual minimum is based on the deceased’s life.

The minimum payment for 2010 would be based on the fair market value of the RRIF at the close of business on December 31, 2009 and the percentage on the life of the deceased. The minimum payment may be taken at any point after January 1, 2010 and December 31, 2010.

The attribution of the payment is in the hands of whomever received the payment. If the payment was received by the original annuitant before their death, then the payment is taxed in their hands. If the successor annuitant receives the payment, it is taxed in their hands.

Barb November 2, 2010 at 5:49 pm

Hello Tax Guy:
In your opening remarks, you stated that the “fair market value of the RRIF or RRSP right before death is included on their final tax return, unless there is a spouse or dependent minor who can take over the account tax-free.” My father has an RRIF account in his name only – under what conditions would my mother be able to take over the RRIF account tax free when my father passes away? She is a retired senior with limited income.
Thanks for your help with this.

Tax Guy November 3, 2010 at 12:42 pm

Your father would have to name a beneficiary or successor annuitant. A named beneficiary will receive the value of the account. The successor annuitant, which is the spouse can take over the payments.

In the event no one is named on the account itself, the proceeds pay to the estate. If there is a spouse, he or she can elect to take the RRSP/RRIF on a rollover basis.

stephen c February 19, 2011 at 6:59 am

Can registered accounts (presently LIF, RRSP and TFSA) be rolled over to an ex-wife’s RRSP without incurring those horrendous taxes?

If not, I would assume the only way to avoid the high taxes, would be some form of life insurance, would you agree?

Tax Guy February 19, 2011 at 11:24 am


If you designate your spouse as either successor annuitant or as the direct beneficiary of the RRSP, RRIF, LIF, LIRA, LRIF etc. This allows for tax-deferred rollovers at death. Beneficiary designations can also be made via your Will.

With the TFSA you can name your spouse as survivor or the beneficiary. Survivor allows the spouse to take over the TFSA following death.

Mike June 1, 2012 at 10:17 pm

My Wife passed away November 18 , 2009 from H1N1. -We had spousal RRSP and was told I have 2 years to transfer in kind over to my RRSP.
-December 23 I called bank and ask for a transfer.
– February 14 ,2011 The RRSP from my wife was put into my RRSP account
– I am the Beneficiary
March 2012 I received 3 forms from bank.
-Official Tax Receipt $ 71,821.81 Feb 14, 2011 Pursuant to Section 60(L)
–T4RSP Year 2011 in my name
Box 18 Refund of premiums $ 20,016.00
–T4RSP Year 2009 in my wife’s name
Box 34 Amount deemed received on Death $54,030.00

Total time elapsed from my wife’s death 1 year 3 months.
all money was put into my RRSP. Is ther any thing I can do not to pay taxes.
The death of my wife at such a young age has been especially devastating for myself and my children.
Thanks for your help

Tax Guy June 4, 2012 at 9:41 am

We should be able to reduce the tax bill. The challenge will be to report is all correctly and on the right returns.

You can give me a call at my office at 289-288-1206 and we can discuss how I can help with the proper filings.

DELIA June 25, 2012 at 10:07 am

My husband’s RRIF was rolled over into my RRSP. He didn’t have a chance to take this year his portion (he passed away on march 2012). Can I withdraw & claim in his name when I’m filling his 2012 taxes?
Thank you.

Tax Guy June 25, 2012 at 12:50 pm

Hi Delia,
Likely it is too late. You can contact me for a consultation and I’d be happy to review the materials and information for a more concise response.

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