Garton & Harris

Estate adminstration: RRSPs and RRIFs of a decedent

Taxes are something about which most adults are concerned. It's no different when it comes to estate planning. An individual who has been tasked with estate administration duties in British Columbia needs to have some knowledge of how RRSPs and RRIFs are taxed after a person's death. The values of both are usually included in the amount of assets of the deceased person and subject to taxation, but it's not always that simple.

Much depends upon who the beneficiary is of those RRSPs or RRIFs. Tax can be deferred if a beneficiary is a spouse or common law partner, a child or grandchild who is financially dependent, or a dependent child or grandchild who has a physical or mental infirmity. There are conditions that apply in these instances.

Canadians should plan their estates with the understanding that funds will be need to pay income tax owing on these accounts when the time comes since a beneficiary – or an estate administrator for that matter – may be on the hook for doing so if that individual is not paid. Of course an individual has the option of reducing the amount of funds in these plans to try to reduce the tax, but that decision hinges upon how it’s done and whether the individual needs the money. The tax bracket in which the annuitant finds him or herself also might play a part in making that decision.

A British Columbia lawyer experienced in the laws that accompany estate administration can provide clarity on issues like RRSPs and RRIFs and estate planning. An estate administrator may need clarification on confusing issues like these. He or she may find the task easier after speaking to a lawyer. 

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