Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the Department.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle du ministère.
Principal Issues:How to report amounts out of an RRSP upon the annuitant's death
Position TAKEN:General recap of documented instructions.
Reasons FOR POSITION:Routine
January 24, 1995
Ottawa District Office Head Office
Client Assistance Rulings Directorate
W. C. Harding
Attention: V. Bernard Ladouceur (613) 975-8953
7-942386
Payments out of an RRSP on Death of an Annuitant
This is in reply to your memorandum of September 13, 1994, in which you asked how amounts paid out of an RRSP should be reported on T4RSPs when a deceased annuitant was a resident of Quebec and whether form T2019 should always be filed if a surviving spouse wishes to transfer the amounts to an RRSP.
The provisions of the Income Tax Act (the "Act") pertaining to these questions was recently amended with application to deaths occurring after 1992. The new provisions are discussed in detail in the 1993 T4RSP and T4RIF Guide. The rules are the same in all of Canada.
As explained in the guide, the only time an amount should be reported as a refund of premiums in box 18 of the T4RSP is when the RRSP is an unmatured plan, the surviving spouse is named as the beneficiary under the plan and the financial institution is making a direct transfer of the amount to the spouse's RRSP. In cases where any amount is paid out of an unmatured plan, the fair market value of the plan at the time of the annuitant's death must be reported in box 34 of the T4RSP. This includes cases where a child or grandchild is named as a beneficiary in the contract and is receiving a refund of premiums.
In the case of a mature plan, the fair market value of the RRSP property at the time of death minus any part of that amount that is or will become receivable directly from the RRSP by the deceased's spouse as a consequence of the death of the annuitant must be reported in box 34 of the T4RSP. Amounts paid to the spouse will thereafter be reported in box 16 of the T4RSP. There is no option in this event. On the other hand, if the deceased's legal representative becomes entitled to receive amounts out of the RRSP as a consequence of the death of the annuitant for the benefit of the spouse, an optional election may be filed to provide for the reduction. Paragraph 6 of IT500 discusses when a legal representative is considered to be entitled to receive amounts for the benefit of a spouse.
As noted above, when a beneficiary is not identified in the RRSP contract to the RRSP property, the fair market value of the RRSP must be reported in box 34. However, after 1992, the amount reported on the deceased's tax return may be reduced by an amount calculated under the new provisions of subsection 146(8.9). An explanation of this calculation can be found at page 11 of the T4RSP and T4RIF guide. This same calculation must also be used to determine the amount to report in box 18 when the deceased's spouse is named as beneficiary of the plan.
To calculate the amount of the reduction, the refund of premiums, as defined in the Act, must first be determined. In this event a form T2019 Refund of Premiums designation may be required. In general, if the deceased annuitant's spouse is named as the beneficiary of the RRSP in the plan itself, in the deceased's will or in accordance with any applicable succession law such as Article 735.1 of the Quebec Civil Code, a designation will not be required and any amount payable to the spouse will be a refund of premiums. On the other hand, if the spouse is not named as the specific beneficiary of the RRSP in the plan or in the deceased's will and the surviving spouse does not have a right to receive the amount as a consequence of the deceased's death under any succession law, but is named as a beneficiary of the deceased's estate, a T2019 must be completed in order to treat any portion of the amount receivable by the spouse as a refund of premiums. Similarly, if a child or grandchild of the deceased can receive property of the RRSP as a refund of premiums, a T2019 should be completed as described in the guide.
In preparing this memo we have assumed that you will be replying to the XXXXXXXXXX and that you will provide the bank with your directions on the amendment of T4RSPs previously filed.
for Director
Financial Industries Division
Rulings Directorate
Policy and Legislation Branch
