10 April 2014 External T.I. 2013-0515681E5 - Death of RPP Member-56(1)(a)

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: In a situation where there is a legal dispute concerning who is a deceased RPP member's common-law partner at the time of the RPP member's death, who is required to include the RPP death benefit in income?

Position: The taxpayer who is legally entitled to receive and is paid the pension benefit.

Reasons: Question of fact/law concerning who is a taxpayer's legal common-law partner at the time of the taxpayer's death. Paragraph 56(1)(a) requires a taxpayer receiving a superannuation of pension benefit in a year to include the pension in the taxpayer's income in the year received.

XXXXXXXXXX
2013-051568
G. Allen

April 10, 2014

Dear XXXXXXXXXX:

Re: Entitlement to RPP Death Benefit – Paragraph 56(1)(a)

This is in reply to your letter dated December 11, 2013 and further to our telephone conversation of January 28, 2014 concerning a pension benefit payable after the death of a member of a registered pension plan (RPP). Your letter describes a situation where a member of an RPP dies and there is a legal dispute concerning who is the deceased RPP member's common-law partner at the time of death. The applicable pension benefits legislation, the Manitoba Pension Benefits Act (PBA), provides that notwithstanding any beneficiary designation under an RPP, a deceased RPP member's spouse or common-law partner is entitled to the pension benefit.

This technical interpretation provides general comments about the provisions of the Income Tax Act and related legislation (where referenced).  It does not confirm the income tax treatment of a particular situation involving a specific taxpayer but is intended to assist you in making that determination.  The income tax treatment of particular transactions proposed by a specific taxpayer will only be confirmed by this Directorate in the context of an advance income tax ruling request submitted in the manner set out in Information Circular IC 70-6R5, Advance Income Tax Rulings.

Our Comments

In general, unless certain exceptions apply, the Manitoba PBA requires a pension plan administrator to pay the pension payable on death of an RPP member to the spouse or common-law partner, if one exists, at the time of death of the RPP member. It is a question of fact and law concerning who is the legal common-law partner of an RPP member at the time of the RPP member's death and therefore, legally entitled to be paid the deceased RPP member's pension.

Paragraph 56(1)(a) of the Income Tax Act requires a taxpayer receiving a superannuation or pension benefit in a year to include the superannuation or pension benefit in the taxpayer's income for the year. Accordingly, the taxpayer who is legally entitled to receive and is paid a deceased RPP member's pension benefit is required to include the pension benefit in the taxpayer's income in the year received, in accordance with paragraph 56(1)(a) of the Act. An exception to this requirement may apply where a taxpayer is legally entitled to renounce or disclaim a legacy.

We trust that our comments will be of assistance.

Lita Krantz, CPA, CA
for Director
Deferred Income Plans Section II
Financial Industries and Trusts Division
Income Tax Rulings Directorate
Legislative Policy and Regulatory Affairs Branch