RRIF Taxation at Death


RRIF Transfer at Death

At death of a non-resident, CRA allows the total value of a RRIF (or an RRSP) to be transferred to a spouse or a legal partner without triggering taxation. (This is the same process as exists for residents of Canada.)

Most financial institutions will allow a new account to be created for the spouse/partner if one does not already exist, even if the spouse/partner is a non-resident. This is an exception for non-resident accounts, because normally a non-resident cannot open a new account in Canada.

It appears that if the non-resident does not have a Canadian Social Insurance Number (SIN), CRA will allow the non-resident to apply for a SIN, thereby allowing the non-resident to open an account and leave the proceeds in Canada.

If there is no spouse/partner, or if the named beneficiary is not a spouse or legal partner, the full value of the RRIF becomes taxable to the deceased.

Taxation of RRIF at Death

CRA's information sheet RC4178 - Death of a RRIF Annuitant says (on page 2, under the heading 'General Rule - deceased annuitant'):

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

Therefore under paragraph 212(1)(q) of the Income Tax Act, a 25% non-resident tax would be withheld on the market value of the assets in RRIF when the annuitant passes away.

Please note that the return-filing requirement in the second sentence in the quotation above does not apply to non-residents of Canada. That is, there is no requirement for the non-resident deceased to file a Canadian Income Tax Return.

The financial institution will automatically deduct the 25% withholding tax if the beneficiary is not a spouse or legal partner...or if the spouse or legal partner elects to take the proceeds as cash rather than rolling proceeds into a registered account (RRSP or RRIF) in their own name.

Return to Non-Resident Taxation

Please refer me to a Canadian Financial Advisor.