4- Registered plans

RRSP and RRIF

The deceased is deemed to have received the FMV of all property held in an RRSP or RRIF at the date of death. However, no amount is included in the deceased’s income if the designated beneficiary or heir is an eligible beneficiary and certain conditions are met. An eligible beneficiary who acquires rights in an RRSP or an RRIF under such circumstances has several options for deferring the income tax on those amounts.

The following table summarizes the rules:

Income earned in an RRSP or an RRIF after the date of death does not have to be included in the deceased’s income.

Home Buyers’ Plan and Lifelong Learning Plan

Amounts that have not been repaid in connection with the HBP or the Lifelong Learning Plan must be included in the final income tax return of the deceased. Tax elections are available to transfer the responsibility for these repayments to the surviving spouse.

Decreases in Value of RRSP and RRIF Investments

If certain conditions are met, losses in the value of investments held in an RRSP or an RRIF that occur after the death of the annuitant and before the final distribution of the investments to the beneficiaries may be deducted in the tax return of the deceased person.

Transfer from an RRSP or RRIF to an RDSP

It is possible to transfer funds held in an RRSP or an RRIF at the time of death to an RDSP of a child or grandchild who was financially dependent on the deceased because of a mental or physical disability.¹¹ However, the amount transferred must not exceed the beneficiary’s RDSP contribution room and is not eligible for the CDSG and CDSB (see Section IV).

TFSA

The TFSA tax consequences upon death of a TFSA holder vary depending on several factors. Generally, the TFSA ceases to be tax exempt as of the death of its holder. However, it is possible, under certain circumstances, to transfer the TFSA to a spouse without affecting the spouse’s contribution room. This is normally the case if the spouse is the designated TFSA successor holder. However, if the spouse is the designated beneficiary, they will receive amounts with no tax consequences, but adding these amounts to their own TFSA will affect their contribution room.

FHSA

The FHSA is deemed to end on December 31 of the year following the year of the holder’s death.

An FHSA usually has only one holder, but a spouse can be designated a successor holder in the event of death. Therefore, the surviving spouse becomes the new FHSA holder upon the death of the initial holder if, at that time, they meet the requirements for opening such an account (Canadian resident aged 18 or older and a first-time home buyer, see Section II). Such a transfer has no tax consequences and does not affect the surviving spouse’s contribution limits.

If the surviving spouse is not eligible to open an FHSA and if they are designated a beneficiary (rather than a successor holder) or if an individual other than the spouse is designated a beneficiary, the funds may be directly transferred to an FHSA, RRSP or RRIF held by the beneficiaries (based on their proportionate share) without immediate tax consequences. Such a transfer must be made before the plan’s maturity date. In the absence of such a transfer, the beneficiaries will receive funds in the form of a taxable distribution.

RDSP

The RDSP is generally terminated upon the death of its beneficiary. The amounts accumulated in the plan, once the CDSB and CDSG have been reimbursed (see Section IV), are taxable under the estate.

⁷ Certain specific terms and conditions may apply.

⁸ Generally, a child (grandchild) is considered to be a beneficiary if he/she lives with the annuitant and his/her net income for the preceding year is less than the basic personal amount or the increased amount in the case of a child with a disability ($15,000 and $24,428 respectively in 2023 for those deceased in 2024). Over these thresholds, dependence has to be proven.

⁹ The beneficiary must be 71 years of age or under at the time of the transfer.

¹⁰ The annuity may provide for payments for a period of not more than 18 years, less the age of the child or grandchild when the annuity is purchased. Annuity payments must start no later than one year after the purchase.

¹¹ Child whose income for the previous year does not exceed a certain threshold ($24,428 for 2023 for the purposes of transfers made in 2024). If the child’s income exceeds that threshold, financial dependence has to be demonstrated.