6 February 2001 External T.I. 2000-0060715 - Payment of Minimum Amount from an 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:

Is there a requirement to pay the minimum amount out of a RRIF after the death of the annuitant?

Position: No.

Reasons:

There is no requirement to pay the minimum amount after the death of the annuitant. However, any transfer of any amounts received by beneficiaries to the beneficiaries RRSPs or RRIFs must be reduced by the minimum amount that would have otherwise been payable in the year of the transfer.

XXXXXXXXXX 		2000-006071
W. C. Harding
February 6, 2001

Dear XXXXXXXXXX:

Re: Payment of Minimum Amount from an RRIF

This is in reply to your letter of December 6, 2000, in which you asked about the requirements to pay the minimum amount out of an RRIF where the annuitant of the RRIF is deceased.

It appears that your request for an opinion involves specific taxpayers and actual completed or proposed transactions. The responsibility for determining the tax consequences arising from completed transactions rests with the tax services offices. The appropriate tax services office may, upon disclosure of all of the relevant facts, be able to assist you in clarifying the tax consequences pertaining thereto. On the other hand, written confirmation of the tax implications of proposed transactions may be provided by this Directorate where the transactions are the subject matter of an advance income tax ruling request submitted in the manner set out in the Department's Information Circular IC70-6R3 Advance Income Tax Rulings a copy of which may be obtained from your local Tax Services Office or on the Internet at http://www.ccra-adrc.gc.ca/E/pub/tp/706r3et/706r3e.txt.html.

Although we cannot comment directly on your situation, we are able to provide you with the following general comments.

The "minimum amount" in respect to a RRIF is defined in subsection 146.3(1) of the Income Tax Act (the "Act"). Basically, it is an amount equal to the fair market value of the RRIF at the beginning of a year multiplied by a factor determined on the basis of the age of the annuitant at the start of the year or, if the annuitant is deceased, the age the annuitant would have been at the beginning of the year if the annuitant were alive.

A "retirement income fund" is also defined in subsection 146.3(1) of the Act to mean an arrangement under which the carrier undertakes to pay to the annuitant and, where the annuitant elects, to the annuitant's spouse after the annuitant's death, amounts each year which total not less than the lesser of the minimum amount and the fair market value of all the property in the RRIF. Accordingly, there is no requirement for a carrier of a RRIF to pay the minimum amount out of the RRIF if the annuitant is deceased and no election was made to have the payments continued to the annuitant's spouse. Paragraph 146.3(2)(d) on the other hand, does require the carrier to distribute as a consequence of the annuitant's death, the property held in the RRIF if the annuitant's spouse does not become the annuitant.

The Agency has published the enclosed fact sheet RC4178(E) Death of a RRIF Annuitant which provides clarification of the amounts that must be paid out of a RRIF after the death of an annuitant. As explained under the General Rule section, the value of a RRIF at the time of death of the annuitant, must generally be included in the income of the deceased annuitant in the year of death unless one of the exceptions noted therein applies. The amount included in the deceased's income must then be paid out of the RRIF. If, however, the amount is not included in the deceased's income because of one of the exceptions, it must be paid to the estate of the deceased or a beneficiary of the RRIF and included in the income of the recipient at the time it is paid. Further explanation of these provisions is also provided in the fact sheet.

When an amount is paid to a beneficiary, it may also be possible to transfer part of the amount received to an RRSP or RRIF of the recipient if the recipient is a "qualified beneficiary". The provisions dealing with these transfers are explained in detail in the fact sheet. It should be noted that the amount that may be transferred is always reduced by the minimum amount calculated, as described above for the year of transfer, minus any amount paid to the annuitant in the year. Accordingly, where the annuitant has died in a previous year, the amount that may be transferred must be reduced by the full minimum amount as calculated for the year.

We trust this explanation will be of assistance to you.

Yours truly,

Roberta Albert, CA
for Director
Financial Industries Division
Income Tax Rulings Directorate
Policy and Legislation Branch

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