What happens to the money in your RRIF after your death – and the taxes on it – will depend on:
- whether or not you name a beneficiary for your RRIF, and
- who you choose as your beneficiary.
The beneficiary is the person or organization you choose to inherit the money in your RRIF. It does not have to be the same beneficiary that you chose for your RRSP.
If you don’t name a beneficiary
Your RRIF will be included in the calculation of probate fees on your estate. The value of your RRIF will also be included as income on your final tax return. That means the beneficiaries of your estate may get less money, after all income taxes and probate fees are paid.
If you name a beneficiary
Your RRIF won’t be included in the calculation of probateProbate Fees to settle your estate after your death. The probate process includes reviewing your will to ensure it’s valid. Also includes paying any debts and giving your money and property to the beneficiaries you have named in your will.+ read full definition fees on your estateEstate The total sum of money and property you leave behind when you die.+ read full definition. Your estate won’t have to include the RRIF’s value on your final tax return or pay income tax if your beneficiary is:
- your spouse,
- a financially dependent child or grandchild who is under 18, or
- a financially dependent child or grandchild of any age who is infirm.
Make sure you name a beneficiary for your RRIF. It’s an important part of estate planning.
If the beneficiary is your spouse
The rules depend on whether you name your spouse as the successor annuitantSuccessor annuitant A spouse or common-law partner who you name as the sole beneficiary of your RRSP or RRIF. The plan will pass to your surviving spouse, and payments may continue without any break. You can only name your spouse or partner as your successor annuitant.+ read full definition of your RRIFRRIF See Registered Retirement Income Fund.+ read full definition.
- If your spouse is the successor annuitant
Your spouse takes over your RRIF and automatically starts receiving your RRIF payments. They won’t have to make any changes to your RRIF investments or incur any fees.
- If your spouse is not the successor annuitant
Your RRIF will be collapsed and the investments sold. As the beneficiary, your spouse can have the money from your RRIF rolled over to their RRSP or RRIF.There may be some disadvantages for your spouse:
- It may not be a good time to sell the investments. Markets may be down.
- There may be selling costs.
- There may be a lot of paperwork and worry for your spouse at a difficult and stressful time.
If you make your spouse the successor annuitant of your RRIF, they will automatically receive your RRIF payments after your death.
If your beneficiary is a financially dependent child or a grandchild
Upon inheriting your RRIF, your beneficiary can:
- buy a term annuity and pay tax on the payments they receive,
- transfer it tax free to their RRSP, or
- roll it over tax free to their RDSP if they have a mental or physical disability.
The amount rolled over from a RRIF to an RDSP can’t be greater than the available contribution roomContribution room The amount you can put into a savings plan like a Registered Retirement Savings Plan (RRSP). If you do not put the full amount into the plan each year, you will have extra, unused contribution room that you can use in later years. Example: Lets say you can contribute $12,000 to your RRSP this year,…+ read full definition or exceed the $200,000 lifetime maximum contributionContribution Money that you put into a savings or investment plan.+ read full definition limit for the RDSPRDSP See Registered Disability Savings Plan.+ read full definition.
If you name a charity as the beneficiaryBeneficiary The person(s), institution, trustee or estate you choose to give money, property or other benefits when you die. You may name beneficiaries in your will, insurance policy, retirement plan, annuity, trust or other contracts.+ read full definition of your RRIF, your estate may receive a charitable donation tax creditTax credit The amount you can deduct from your income when you file your taxes. This lowers the tax that you owe.+ read full definition of up to 100% of the RRIF income reported when the final taxTax A fee the government charges on income, property, and sales. The money goes to finance government programs and other costs.+ read full definition return is filed. This may offset any tax owing on the proceeds of the RRIF.
Name a beneficiary for your RRIF to avoid probate fees on your estate. Your RRIF is not included in the value of your estate if your beneficiary is your spouse or a financially dependent child or grandchild.