CRA confirms that a deceased’s FHSA can be rolled into the surviving spouse’s FHSA, RRSP or RRIF even if the proceeds go first to the estate (albeit, subject to s. 153(1)(v)(i) withholding)

CRA confirmed that if amounts from a deceased holder's FHSA are deposited into the estate's account and then subsequently transferred by it directly to the surviving spouse's FHSA, RRSP or RRIF, s.146.6(15)(a) will deem that indirect transfer to be a direct tax-free transfer from the deceased’s FHSA to such spousal plan, to the extent that it is so designated jointly by the legal representative and the surviving spouse and the usual conditions in s. 146.4(7) otherwise relating to a direct transfer are satisfied.

However, CRA indicated that, if because of the withholding tax under s. 153(1)(v)(i) that would be imposed on the amount paid from the deceased’s FHSA to the estate, the estate did not have sufficient cash to pay the gross proceeds of that FHSA directly to the surviving spouse's FHSA, RRSP or RRIF, the tax free transfer amount would be required to be reduced accordingly.

If the proceeds from the deceased’s FHSA were distributed by the estate to the surviving spouse rather than directly to that individual’s FHSA, RRSP or RRIF, the surviving spouse would not be able to then make the tax-free transfer to such plan.

Neal Armstrong. Summary of 10 October 2024 APFF Financial Strategies & Instruments Roundtable, Q.7 under s.146.6(15)(a).