All About Estates

RRSP transfers after death

The Canada Revenue Agency (CRA) recently weighed in on the eligibility for a tax-free transfer of registered retirement savings plan (RRSP) to a beneficiary after the death of the annuitant.

The situation involved an individual who submitted a request to their financial institution to transfer the funds to the RRSP of their spouse or common-law partner or former spouse or common-law partner (hereinafter “spouse” encompasses spouse, common-law partner and former spouse or common-law partner). However, the individual died prior to the financial institution transferring property under the RRSP on behalf of the individual.

The tax rules permits a tax-free transfer of an amount directly from an unmatured RRSP, by the issuer of the RRSP on behalf of the individual who is the annuitant under the plan, to an RRSP or registered retirement income fund under which their spouse is the annuitant. The individual and their spouse must be living separate and apart and the transfer must be made pursuant to a court order or written separation agreement relating to a division of property in settlement of rights arising out of, or on the breakdown of, their marriage or common-law partnership.

The CRA took the position that the tax-free transfer only encompasses actual direct transfers of property from the individual”s RRSP to the individual’s spouse’s RRSP while the individual is still alive.

As in so many other instances timing is everything in the case of tax free RRSP transfers. Speak with a pro for real guidance in this matter.

About Derek de Gannes
Derek A. de Gannes: Senior Director, Business Tax of RSM Canada. RSM Canada is committed to the highest level of integrity, quality and professionalism and provides clients with solutions in the area of Audit, Tax and Transaction Services. Email: derek.degannes@rsmcanada.com