CRA would include the full FMV of a RRIF in the annuitant’s income on death given no payment thereunder to the spousal beneficiary before that survivor’s death

The last annuitant of a trusteed registered retirement income fund (“RRIF”) died in 2018, and that annuitant’s spouse, who was the sole designated beneficiary under the RRIF, died before the distribution of RRIF proceeds, which was made to the spouse’s estate in 2020.

Because no amounts were paid to the designated beneficiary, there was no designated benefit, so that pursuant to s. 146.3(6), the full FMV of all the RRIF property held at the time of the annuitant’s death was included in the income of the annuitant in the year of death, rather than being included in the income of the surviving spouse.

Given that the RRIF continued to be exempt from tax until the end of the year following the death (i.e., until the end of 2019), and the trust could take a deduction in 2020 for gain and income distributed by it, appreciation in the RRIF property between the date of the annuitant’s death and the distribution date was to be included in the income of the spouse’s estate for 2020.

Neal Armstrong. Summaries of 12 March 2021 External T.I. 2020-0867001E5 under s. 146.3(1) – designated benefit and s. 146.3(3.1).