What happens to an RRSP when someone dies?

• Without a qualifying rollover, the RRSP's fair market value is taxable on the final return.
• A spouse or common-law partner named as beneficiary can usually roll the plan into their own RRSP or RRIF.
• A financially dependent child or grandchild may qualify for special treatment, including an annuity or RDSP transfer in some cases.
• The estate generally pays the tax even if the plan proceeds went directly to a named beneficiary.
• RRIFs follow broadly similar rules with a successor annuitant option for spouses.

RRSP contributions were deducted and growth was tax-deferred. Death triggers the deferred tax unless a rollover applies. Because the entire plan value is added to income in one year, the marginal rate is often the highest bracket.

If the spouse or common-law partner is named as beneficiary or receives the amount as a refund of premiums through the estate, the value can generally be transferred to their RRSP, RRIF or eligible annuity, deferring tax until they withdraw. Forms and timelines apply, so involve the executor and the financial institution early.

A common problem: the RRSP goes directly to a named adult child, but the tax liability stays with the estate, which may hold illiquid assets. Beneficiary designations should be reviewed alongside the will so the burden falls where intended.

• Rules differ in Quebec, where designations are typically made in the will.
• Executors can be personally liable for unpaid tax if assets are distributed prematurely.
• This is general information; obtain guidance from a Canadian tax professional or estate lawyer.

• Doing taxes for someone who died — Canada Revenue Agency
• Registered Retirement Savings Plan (RRSP) guidance — Canada Revenue Agency
• Income tax information for individuals — Canada Revenue Agency