# Taxes on LIRA after death, and Q: about pension after death...



## ilovebees (Oct 31, 2013)

Who pays the tax on a LIRA after someone dies and there is a designated beneficiary?
I have read conflicting things online and am confused. 

My step father passed away. He had a LIRA and named me as the beneficiary of it. He was not married (my Mom and him have been divorced several years, but i still considered him my step dad) 

Anyway, as such, I received a lump sum of the balance of the LIRA. It looks like no tax was held or taken off -- i got the full amount sent to me via cheque from the company it was with. 

Now, I have read that the the ESTATE will pay the tax owing on it when they file his last tax return for him on his behalf. And I have read that as a named beneficiary, I receive it TAX FREE (because the estate pays the tax on it) Is this true? I would just hate to think I have $______ when really, it's 30% (or whatever) less than what I actually got because I have to pay tax on it. 

If the information is relevant, I always received a good tax RETURN each year because I qualified as a "low income earner" -- so it's not like i'm making a 6 figure income and got this extra money. 

Any help would be appreciated!!! 

ALSO-- as a side note, I am also going to be receiving the balance of his pension (as a named beneficiary) he had with his work. The company said they will probably hold back 30% withholding tax. Is that something I can "get back" from the estate (reimbursed), or do i just cut my losses on that? Would I still be subject to ADDITIONAL tax even after the withholding tax is taken?

Thanks for any insight. I'm
Clueless about taxes. (although learning as of late...)


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## Guban (Jul 5, 2011)

I'm not sure about a LIRA, but the process you describe is accurate for a RRSP/RRIF. You get the full amount, and the account is taxed in the FINAL (terminal) return.

How will you be getting the balance of the pension? Will you receive a monthly survivor benefit? If so, you'll get a T slip, and include the income and taxes withheld on your tax return. You should be able to get part/all of it back, depending on your income. If you are a high income earner, then you'd be paying more than 30%, but this is calculated from you tax return.


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## OptsyEagle (Nov 29, 2009)

You are correct. You will receive the proceeds of the LIRA tax free and the estate will get the tax bill. The only caveat to you is if the estate does not have the money to pay this tax bill. If that is the case the government will send you the bill.

Not sure I understand exactly what is going on with the pension. Are the pension payments just resuming to you each month or is the pension being commuted to a lump sum value that you are inheriting? If it is the latter, it should work just like the LIRA, I would think. Perhaps they have different rules.

All that being said, unless your step dad has lots of non-registered cash in his estate or a valuable house that will be sold, etc., I would expect to get a tax bill for these amounts. You are receiving pre-tax amounts so the only thing we know for sure is the government will get their taxes. You will need to determine if there is another place for them to get it, other then from you.


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## sags (May 15, 2010)

The executor of the will, is personally liable for the estate taxes, if they have distributed assets from the estate before all the taxes are paid.

Taxes should be paid in full, or sufficient funds should be held back by the executor, before distribution occurs.

You should contact the executor to ensure they have a Final Tax Clearance Certificate for the estate.


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## OhGreatGuru (May 24, 2009)

The difficulty in the situation described (designated beneficiary of a LIR/RRSP/RRIF) is that this money is passed outside of the estate, directly to the beneficiary, without going through the executor's hands. These funds are not "distributed by the executor". This is one of the "Catch 22's" of a named beneficiary other than a spouse. The beneficiary gets the money, but the estate is left holding the bag for the taxes due.


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## ilovebees (Oct 31, 2013)

Thanks very much for the replies. 

I'm fairly certain there will be enough in the estate to cover the taxes. Do I declare anything on my personal return for any of this?


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## Guban (Jul 5, 2011)

No. Think of it as a gift.


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