Generally the RRSP or RRIF of a deceased can be transferred by specific bequest under the terms of the deceased’s will to a qualifying survivor tax-free. A qualifying survivor would be the deceased annuitant spouse or common-law partner or a financially dependent child or grandchild. When payments from a deceased annuitant’s RRSP are paid to the annuitant’s estate and a qualifying survivor is a beneficiary of the estate, the deceased annuitant’s legal representative and the qualifying survivor can jointly file an election (Form T2019) to designate all or part of the amounts the annuitant’s estate received from the RRSP to have been received by the qualifying survivor as a refund of premiums, to give the effect of a tax-free rollover.
In a recent roundtable (2020-0851621C6), the Canada Revenue Agency (“CRA”) was asked if a joint election on Form T2019 was required if a RRSP (not yet matured) was subject, pursuant the terms of the will of the deceased annuitant, to a specific bequest in favour of the surviving spouse and if the RRSP proceeds were paid out directly by the RRSP issuer to the surviving spouse in accordance with the instructions of the estate executor. Then the CRA was asked (if the answer to the first question was yes or, if the RRSP was part of the estate residue, if the surviving spouse was entitled to it if some administrative relief was available and Form T2019 was not required in a situation where the legal representative gave instructions to the RRSP issuer to pay the RRSP proceeds directly to the surviving spouse. Finally, the CRA was asked if the answers to the above questions would be the same for an RRIF.
Regarding the first question, the CRA confirmed that the joint election was required. Because an amount paid pursuant to a specific bequest of the RRSP in favour of the surviving spouse would not qualify as a “refund of premiums”, the joint election under the Income Tax Act (the “Act”) by the legal representative and the surviving spouse on Form 2019 was required for the RRSP payment to be deemed received by the surviving spouse as a “refund of premiums” benefit.
On the second question, the CRA confirmed that administrative relief would not be available to allow Form 2019 not to be filed in a situation where the legal representative gave instructions to the RRSP issuer to pay the RRSP proceeds directly to the surviving spouse. The administrative relief as outlined in CRA information circulars and guide associated with this subject, is only available if all conditions were met, including that a direct transfer has to be made from the deceased’s RRSP to the surviving spouse’s RRSP or RRIF, or to an issuer to buy an eligible annuity for the surviving spouse. There is no other administrative relief available in the situation described above.
On the last question, the CRA confirmed that similar rules apply to both RRSPs and RRIFs.
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