# Death of RRIF and TFSA holder



## yyzvoyageur (Apr 10, 2009)

I was hoping someone in the know or someone who's gone through this before can lend some ideas. A family member recently passed away. Both he and his wife have RRIFs with BMO (hers with BMO Investments and his with InvestorLine). She is listed as the beneficiary on his RRIF. Unfortunately, we're getting a bit of the run around from the bank. Our contact at the bank branch said he can't do anything with the deceased spouse's RRIF. My somewhat limited understanding is that the deceased spouse's RRIF should effectively be merged with his wife's RRIF. Is that correct? How will this be done in actual practice? 

Additionally, both spouses have TFSAs with BMO Investments Inc. The wife is named as successor holder on her husband's TFSA. How does that work exactly?

Thanks.


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## MoneyGal (Apr 24, 2009)

If you die with a RRIF, you (as the plan holder) are deemed to have received the fair market value of your RRIF just before death. 

If your spouse is a *successor annuitant*, the RRIF continues, income received is taxed in the hands of your spouse.

If the spouse is the *sole beneficiary*, funds can be transferred to:

- RRSP, if spouse under age 71
- RRIF → minimum annual withdrawals start in the following year
- buy an annuity


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## MoneyGal (Apr 24, 2009)

Here's the CRA bulletin on Death of a TFSA Holder:

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/dth/menu-eng.html


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## Karen (Jul 24, 2010)

It seems strange to me that there would be any problem with the bank, if, as you say, she is the beneficiary of the RIF. When my husband died, I simply went into the TD Bank with a copy of the death certificate, signed some papers, and his RIF was transferred into my RRSP the next day. Mind you, the RIF was all in GICs, so perhaps that simplifed things, but I don't see why it should make a difference.

There was no such things as TFSAs at that time (2003), so I've had no experience with that, but my own TFSA names my daughters as beneficiaries, and I'm sure it will be just as straighforward.

I have one question, though: What is a successor annuitant, and what is the difference between that and a beneficiary? I thought I was familiar with all the rules about RRSPs and RIFs, but I've never heard of successor annuitants. Is it possible that it's something that applies only in some provinces?

Edited to add: MoneyGal, I just read the link you posted, but I'm still confused. It does, however, suggest that some of the rules are subject to provincial law so maybe it is something that doesn't apply in BC.


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## stardancer (Apr 26, 2009)

The bank should be transferring the RIF into her name. It will continue as separate from her own RIF (not merged)

Basically, she will receive a T4RIF showing that she received the information, AND another T slip (can't remember which one, but like an RSP contribution) showing the amount transferred into her own name. She then declares it as income and as a contribution on her next tax return.

Surely, somebody at the bank knows what to do upon the death of an account holder.

A successor annuitant is the holder of a spousal RSP- one spouse contributes to his/her spouse's RSP who is the successor annuitant. As opposed to the beneficiary: one person contributes to an RSP in his/her own name, and can then name whomever as the beneficiary; usually this is the spouse, but can be someone else.


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## MoneyGal (Apr 24, 2009)

Stardancer. "Successor Annuitant" is the term used by CRA. 

Here is the CRA bulletin on death of a RRIF annuitant:

http://www.cra-arc.gc.ca/E/pub/tg/rc4178/rc4178-e.html

From that bulletin: 

*General rule - deceased annuitant*

When the annuitant of a RRIF dies, we consider that the annuitant received, immediately before death, an amount equal to the FMV of all the property held in the RRIF at the time of death. This amount and all other amounts the annuitant received from the RRIF during the year have to be reported on the annuitant's return for the year of death.

A beneficiary will not have to pay tax on any payment made out of the RRIF if it can reasonably be regarded as having been included in the deceased annuitant's income.

*Exception 1 - Spouse or common-law partner as successor annuitant* - We do not consider the deceased annuitant to have received an amount at the time of death if the RRIF contract or the annuitant's will names his or her spouse or common-law partner as the successor annuitant of the RRIF. In this situation, the RRIF continues and the spouse or common-law partner becomes the successor annuitant. All payments made out of the RRIF after the date the annuitant died become payable to that successor annuitant. The successor annuitant will receive a T4RIF slip for the year of death (if applicable) and for future years showing the payments he or she received. The successor annuitant has to report the payments on his or her tax return for the year they are received.

If the spouse or common-law partner is not named as the successor annuitant, he or she can still be considered as a successor annuitant if the deceased annuitant's legal representative consents to the designation and the RRIF carrier agrees. For common-law partners of the same sex, this only applies if the annuitant died after 1997.

*Exception 2 - Spouse or common-law partner is the sole beneficiary of the RRIF* - We do not consider the deceased annuitant to have received an amount from the RRIF at the time of death if the annuitant had a spouse or common-law partner when he or she died and both the following conditions are met:

- the spouse or common-law partner is named in the RRIF contract as the sole beneficiary of the RRIF; and
- by December 31 of the year following the year of death, the entire eligible part of the RRIF property is directly transferred to an RRSP or RRIF under which the spouse or common-law partner is the annuitant, or to an issuer to buy an eligible annuity for the spouse or common-law partner.

If both these conditions are met, only the spouse or common-law partner will receive a T4RIF slip. The total amount that was paid out of the RRIF will be shown in box 16 of the slip, and the part that was transferred will be shown in box 24 of the slip. The amount shown in box 16 has to be reported on line 115 of the spouse's or common-law partner's tax return for the year the transfer was made. The spouse or common-law partner will receive an official receipt for the amount that was transferred. To find out how to claim a deduction for the transfer, see “Qualified beneficiaries - transfers”.

/quote


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## MoneyGal (Apr 24, 2009)

Karen. The difference, in the case of a RRIF, lies in how the investments inside the RRIF are treated upon the RRIF annuitant's death. 

If you have named your spouse as the "successor annuitant," the payments from the RRIF continue and are taxed in your spouse's hands. 

If you have not named a successor annuitant, but instead have only a sole beneficiary, RRIF is collapsed causing a disposition of the assets and a rollover to the surviving spouse not of the RRIF itself, but of the collapsed assets from the RRIF. 

There are important differences between a RRIF and an RRSP and other registered plans and this is one of them. 

In most cases a successor annuitant designation is likely the best choice. 

I suspect, based on what the OP wrote, that the RRIF designates a successor annuitant, not a sole beneficiary; which is why "nothing can be done" to the RRIF. 

However, as this thread demonstrates (I think) the distinction between a successor annuitant and a sole beneficiary in the specific case of RRIFs is not well-understood.


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## yyzvoyageur (Apr 10, 2009)

stardancer said:


> Surely, somebody at the bank knows what to do upon the death of an account holder.


Yes, one would think. They have had little difficulty switching over bank accounts for us, but we're having a lot of trouble sorting out RRIFs, TFSAs and non-registered investment accounts. There's one of two things at play here: ineptitude or spite (long story).

Anyhow, thanks all for the advice!


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## kcowan (Jul 1, 2010)

When my brother died, I asked them to transfer his RRIF holdings in kind, since I was his sole benficiary and they refused, instead liquidating everything. 

I think the bank was wrong but, with everything else to settle, I let it go. I assured them that I had enough cash to pay the taxes. And they did not withhold any of the money.


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## MoneyGal (Apr 24, 2009)

kcowan said:


> When my brother died, I asked them to transfer his RRIF holdings in kind, since I was his sole benficiary and they refused, instead liquidating everything.


They had no option. There are no in-kind rollovers except for surviving spouses or financially dependent children. They are required to liquidate the RRIF.


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## cannon_fodder (Apr 3, 2009)

So, if I have read this correctly, a successor annuitant would mean that no disposition of assets takes place effectively upon death and the situation where the RRIF names a sole beneficiary, unless you are a qualified beneficiary, could create a tax liability for the beneficiary?

Does the annuitant and the beneficiary get control over the investment accounts but are still subject to the separate withdrawal rates of the bequeathed RRIF?


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## OhGreatGuru (May 24, 2009)

cannon_fodder said:


> So, if I have read this correctly, a successor annuitant would mean that no disposition of assets takes place effectively upon death and the situation where the RRIF names a sole beneficiary, unless you are a qualified beneficiary, could create a tax liability for the beneficiary?
> 
> ...


The tax liability is to the estate, not the beneficiary directly. But if there are insufficient funds in the estate to pay the tax bill, CRA can come after the beneficiary for the money. 

This because RRSP/RRIF is tax deferral plan. Taxes are paid as withdrawals are made and/or upon death of the annuity. The exception is if the RRSP/RRIF can be rolled over to a qualified successor annuitant or beneficiary, usually a spouse. The tax bill is just further deferred during the life of such a beneficiary.


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## kcowan (Jul 1, 2010)

MoneyGal said:


> They had no option. There are no in-kind rollovers except for surviving spouses or financially dependent children. They are required to liquidate the RRIF.


OK good that makes me feel better. Cash has worked out OK anyway.


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## MoneyGal (Apr 24, 2009)

I'm just glad it didn't make you feel worse!


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