Much has been written by the contributors to this blog about the various taxes arising in the year of death. As a tax adviser I will look for a way to either reduce the final tax or, at a minimum, defer some of the final tax to a later time. One such way of deferring the tax arising on death is for the executor to make one final registered retirement savings plan (RRSP) contribution for the year in which a person has died.
To the extent the deceased had unused RRSP contribution and a surviving spouse under the age of 72 at the time of death, his or her executor has 60 days from the end of year of death to make one final RRSP contribution which can only be made to a spousal RRSP. A tax deduction for the amount of the spousal RRSP contribution may be taken in the deceased’s final tax return. The deduction amount is limited to the lessor of the deceased’s unused RRSP contribution room and the amount of the contribution. The usual attribution rules will apply if the surviving spouse withdraws the spousal RRSP contribution from his or her plan within a restricted period.
There are both tax intricacies and opportunities with RRSPs in the year of death. My next few blogs will deal with some of these items so stay tuned for more on this topic.
Derek de Gannes