The Canada Revenue Agency was asked whether, in the case of the death of a spouse, the other spouse would have the right to split the eligible pension income that he or she receives in a taxation year with the deceased.
In order to split eligible pension income, our tax rules requires that the surviving spouse be a “pensioner” (defined term), the deceased spouse is a “pension transferee” (another defined term), and the surviving spouse and the legal representative of the deceased spouse must complete and sign Form T1032.
The split-pension income amount will be the amount elected not exceeding 50% of the eligible pension income of the pensioner multiplied by the proportion that the number of months at any time during which the pensioner was married to or was in a common-law partnership with the pension transferee is of 12. In other words, where the pension transferee dies in February, the number of months at any time during which the pensioner was married to, or was in a common-law partnership, would be two and the maximum split-pension amount would be 2/12 of 50% of the eligible pension amount.
Reducing the terminal year tax is one of many ways to increase the size of the estate for distribution.