6 July 2000 Ministerial Correspondence 2000-0034404 - Designated benefit out of a RRIF

Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.

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: Can a portion of a taxpayer's RRIF be transferred on his death to his spouse's RRIF and taxed to the spouse.

Position: Yes

Reasons: The amount is considered to be a designated benefit and the amount can be transferred to the spouse's RRIF; the amount so transferred may be taxed to either the deceased or the spouse and, if taxed to the spouse, would be eligible for a deduction if transferred to the spouse's RRIF.

XXXXXXXXXX 2000-003440
M. P. Baldwin
July 6, 2000

Dear XXXXXXXXXX:

Re: Designated Benefit out of a Registered Retirement Income Fund ("RRIF")

This is in reply to your letter of June 5, 2000 to the Commissioner of the Canada Customs and Revenue Agency (formerly Revenue Canada) which was forwarded to our directorate. You ask whether you must transfer all of your RRIF to your spouse on your death or may choose to transfer only a portion, and what the tax consequences will be on the transfer of these funds to your spouse.

The Canada Customs and Revenue Agency's general views regarding the taxation of amounts held in a deceased annuitant's RRIF can be found in the guide titled RRSPs and Other Registered Plans for Retirement (T4040). We have enclosed this guide and an Information Sheet entitled Death of a RRIF Annuitant which deals specifically with amounts from a deceased annuitant's RRIF.

When you die you will be considered to have received immediately before death, an amount equal to the fair market value of all the property held in the RRIF at the time of death. This amount and any other amounts you received in the year from the RRIF have to be reported on your return for the year of death.

However, as noted in Chart 2 on page 3 of the Information Sheet, the amount of a "designated benefit" paid out of a RRIF to your wife may be deducted from your income and taxed in the hands of your wife at the option of your legal representative. Please refer to the shaded areas of Chart 1 on page 1 of the Information Sheet for a description of the amounts that may qualify as a designated benefit.

Your wife may claim a deduction for the amount of a designated benefit which she brings into her income if she transfers it to her RRIF in the year she receives the designated benefit or within 60 days after the end of the year.

If your wife is not a beneficiary of the RRIF, but rather of the estate, please refer to the enclosed form T1090 Death of a RRIF Annuitant - Designated Benefits which can be used by your wife and your legal representative to have the amount paid out of the estate to your wife's RRIF to be considered a "designated benefit" received by her directly. This designation then permits the amount to be deducted from your income, included in your wife's income and, if transferred to her RRIF within 60 days after the end of the year in which the estate received the amount, eligible for the off-setting deduction.

Consequently, we confirm that the amount of your RRIF that is taxable on your death is the full amount of your RRIF less, if your legal representative chooses, the amount you bequeath to your wife. If you have any questions concerning the above comments, you may contact the writer of this letter at (613) 957-8979 or your local tax services office.

We trust that the above comments and enclosures will be of assistance to you.

Yours sincerely,

Patricia Spice
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

M.P. Baldwin
957-2087
July 6, 2000