What happens to CPP and OAS benefits after death? – A postscript

In my last blog, I wrote that if a person was receiving Canada Pension Plan (CPP) and Old Age Security (OAS) benefits at the time of death, payments will continue to be made until the Government of Canada is notified of the death. At that point, if benefits were received after the month of death, the government of Canada will request a repayment of those benefits. In other words, the deceased is only entitled to benefits to the month of death.

After the posting of my blog, I was reminded of one additional item to be aware of in this regard. If a person was receiving OAS benefits at the time of death, these payments may be clawed back on the terminal return (personal tax return in the year of death) if net income for the year (being the year of death) as determined on line 234 of the tax return exceeds the income threshold for receiving OAS. In 2010, this amount was approximately $67,000.

As discussed in previous blogs, the deceased is deemed to have disposed of all of his or her assets in the year of death, including RRSPs, RRIFs, securities etc. As such this may lead to sufficient income inclusions on the terminal return to exceed the threshold. The claw back is referred as the social benefits repayment on the tax return (line 235) and will form part of the total taxes otherwise payable at line 435 of the return.

Thanks to a reader of our blog for drawing this to my attention.

Thanks for reading