26 September 2006 External T.I. 2006-0189141E5 - Beneficiaries 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.

Principal Issues: Can a taxpayer who is legally married and also living in a common-law relationship with a different individual have two spouses for purposes of the RRIF legislation, particularly with respect to the tax-deferred rollover on death of the annuitant?

Position: Question of fact, but likely yes

Reasons: wording of the legislation

XXXXXXXXXX 								2006-018914
									Kimberly Duval, CA
September 26, 2006						(613) 599-6054

Dear XXXXXXXXXX:

Re: Beneficiaries of a Registered Retirement Income Fund

This is in response to your letter of May 15, 2006 requesting further comments from us as to whether you would be considered to have two spouses for purposes of the legislation governing registered retirement income funds ("RRIFs") in the event of your death. You indicate in your letter that you are legally separated from your wife and are currently living in a common law relationship with a different woman. Each woman is currently listed individually as a beneficiary on two separate RRIF plans to which you are the annuitant. Although we have previously provided you with our comments in this matter in relation to registered retirement savings plans in 1995 (E9505545), you have requested confirmation that the same position would apply now that the funds have been transferred into RRIFs.

The situation outlined in your letter is a factual one, involving a specific taxpayer. It is not this Directorate's practice to comment on proposed transactions involving specific taxpayers other than in the form of an advanced income tax ruling. Although we cannot comment on your specific situation, we are prepared to provide the following general comments, which may be of assistance.

The Canada Revenue Agency's general views regarding the treatment of RRIF amounts following the death of the annuitant are contained in Information Sheet RC4178 entitled "Death of a RRIF Annuitant" and also in the T4RSP and T4RIF Guide (form T4079).

In general, a RRIF is an arrangement between a carrier and an individual (namely the annuitant) under which, in consideration of property, the carrier undertakes to pay the yearly minimum amount to the annuitant. Where the arrangement between the carrier and the annuitant provides for its continuance with the annuitant's spouse or common-law partner named as the "successor annuitant", the RRIF carrier will continue to make payments to the annuitant's spouse or common-law partner after the death of the annuitant. Where the arrangement does not provide for a successor annuitant, payments may continue to be made by the carrier to a successor annuitant at the consent of the deceased annuitant's legal representative and the RRIF carrier.

Should a successor annuitant not be named, upon the death of the last annuitant of the RRIF, subsection 146.3(6) of the Act deems the annuitant to have received, immediately before death, an amount out of the RRIF equal to the fair market value of the property at the time of death. This amount, and any other amounts received by the annuitant in the year from the RRIF, must be included in the deceased annuitant's income for the year of death. However, subsection 146.3(6.2) of the Act may reduce this income inclusion by permitting a deduction from the deceased annuitant's income for the year of death for an amount paid directly from the RRIF to a qualifying beneficiary as a designated benefit.

An amount that qualifies as a designated benefit is taxable to the recipient in accordance with subsection 146.3(6.1) of the Act, and, where the beneficiary is the spouse or common law partner of the annuitant, such individual may claim a deduction under paragraph 60(l) of the Act for the amount of a designated benefit that is brought into their income. This deduction is only available if, in the year of receipt of the designated benefit, or within 60 days after the end of the year, it is transferred to an RRSP, a RRIF, or an annuity as described in subparagraph 60(l)(ii) of the Act, under which the spouse or common law partner is the annuitant.

As the provisions of the Act governing RRIFs specifically refers to "a spouse or common law partner", the law is clear that, where an annuitant under a RRIF like yourself is both legally married and living with a different individual in a common-law relationship (as defined in subsection 248(1) of the Act), upon the annuitant's death, either one of the annuitant's spouse or common-law partner could be named as a successor annuitant under a RRIF or could be considered to have received a designated benefit as a qualifying beneficiary.

We trust our comments will be of assistance to you.

Yours truly,

Mary Pat Baldwin, CA
for Director
Financial Sector and Exempt Entities Division
Income Tax Rulings Directorate
Policy and Planning Branch