When an RRSP holder dies, the plan doesn’t simply pass to the family untouched. Unless it goes to a spouse or a financially dependent child, the whole balance is added to income on the final tax return. This page explains how that works, who can defer the tax, how the spousal rollover is done, and what the bill looks like when no rollover applies. For how to set up the designation itself, see RRSP beneficiary vs estate; if the plan had already become a RRIF, the successor annuitant option is in what happens to a RRIF when you die. Every other RRSP and RRIF topic is in the RRSP and RRIF guide directory.
The core rule: the RRSP is treated as cashed out at death
CRA treats the holder as having received the fair market value of everything in the RRSP immediately before death. That amount goes on the deceased’s final (terminal) T1 return, which covers January 1 to the date of death.
| Rule | Details |
|---|---|
| Income inclusion | Full RRSP value at death is added to the final return |
| How it is taxed | Through the normal brackets, together with all other income for that year |
| Exception | A refund of premiums to a qualifying survivor (spouse or common-law partner, or financially dependent child or grandchild) |
| Who pays | The estate, before assets are distributed |
How big the tax bill can be
Because the whole balance lands in one year, most of a large RRSP ends up taxed in the upper brackets. For an Ontario resident with no other income in the year of death, the income tax on the RRSP alone is roughly:
| RRSP value at death | Approximate income tax | Share of the RRSP |
|---|---|---|
| $200,000 | $64,722 | 32.4% |
| $400,000 | $169,452 | 42.4% |
| $600,000 | $276,512 | 46.1% |
Estimated with the site’s current-year federal and Ontario tax model, including the basic personal amount, Ontario surtax and Health Premium, and treating the balance as non-employment income (no CPP, EI or employment credits). Other income in the year of death, and the province, change the result. Your own figures can be run through the marginal tax rate calculator.
Who receives the RRSP, and how it is taxed
| Who receives it | Tax on the final return | Tax deferred to |
|---|---|---|
| Spouse or common-law partner (refund of premiums, transferred) | None on the transferred amount | The survivor’s future withdrawals |
| Financially dependent child or grandchild under 18 | Can be deferred through an annuity to age 18 | The child, as annuity payments are received |
| Financially dependent child or grandchild with an impairment | Can be deferred through a transfer to their RRSP, RRIF or RDSP | The child’s future withdrawals |
| Adult child who is not financially dependent | Full value included | No deferral |
| Registered charity | Full value included, offset by the donation credit | No deferral, but the credit reduces the tax |
| The estate | Full value included, unless a T2019 designation applies (see below) | No deferral |
A child or grandchild generally counts as financially dependent if their net income for the previous year was below the basic personal amount for that year (the basic personal amount plus the disability amount for a child with an impairment).
The spousal rollover, step by step
| Step | What happens |
|---|---|
| 1 | The RRSP holder dies with the spouse or common-law partner named as beneficiary |
| 2 | The financial institution pays the plan to the survivor as a refund of premiums (reported on a T4RSP slip) |
| 3 | The survivor transfers the amount to their own RRSP, RRIF, or an eligible annuity, in the year received or within 60 days after the end of that year |
| 4 | The survivor reports the refund of premiums and claims an offsetting deduction on their own return |
| 5 | Nothing from the RRSP is taxed on the deceased’s final return |
| 6 | The survivor pays tax later, as they withdraw |
The transfer does not use the survivor’s own RRSP contribution room. A survivor past the age-71 conversion deadline transfers to a RRIF or annuity rather than an RRSP.
If the estate was named instead
If the RRSP is paid to the estate but the spouse or a dependent child is a beneficiary of the estate, the executor and the survivor can jointly file Form T2019 to designate all or part of the payment as a refund of premiums to that survivor. The deferral is then available, but the money has gone through the estate and probate first. The simpler route is a direct designation, as set out in RRSP beneficiary vs estate.
Several beneficiaries
A designation can be split. Only the portion going to a qualifying survivor can be deferred; a portion left to an adult child is taxed on the final return.
RRSP vs RRIF at death
A RRIF follows the same basic rule, with one extra option: the spouse can be named successor annuitant, so the RRIF simply continues in the survivor’s name without being collapsed. The RRIF-specific steps and forms are covered in what happens to a RRIF when you die, and the choice between the two designations in RRIF successor annuitant vs beneficiary.
Probate
An RRSP with a named beneficiary (other than the estate) generally passes outside the estate and does not go through probate. One left to the estate, or with no beneficiary named, does. In Ontario, estate administration tax is 1.5% of the estate value above $50,000, so a $400,000 RRSP left to the estate adds about $5,250. Quebec handles beneficiary designations and estate settlement differently: institutions such as RBC Direct Investing don’t accept a plan designation from Quebec residents, so the beneficiary is named in the will, and a notarial will does not need to be probated. The trade-offs are compared in RRSP beneficiary vs estate.
What the executor handles
The executor gets the date-of-death value from the institution, reports the RRSP on the final return (or confirms the survivor’s rollover), files any T2019 joint designation, pays the tax, and usually obtains a CRA clearance certificate before distributing the estate; without one, the executor can be personally liable for unpaid tax up to the value distributed.
Reducing the tax before death
- Name the spouse directly and keep the designation current with each institution.
- Draw the RRSP down in lower-income years so less is taxed at once at death; see the RRSP meltdown strategy.
- Convert to a RRIF and take withdrawals over retirement; the RRIF minimum withdrawal table shows how the required rate rises with age.
- Leave part to charity. In the year of death, donations can be claimed up to 100% of net income, and any excess can be claimed on the return for the previous year (also up to 100% of that year’s net income). Naming a charity as RRSP beneficiary counts as a donation.
- Life insurance sized to the expected tax bill lets heirs keep more of the RRSP. A joint last-to-die policy is often used, since the tax usually arrives when the second spouse dies. See life insurance in estate planning.
Common mistakes
| Mistake | Consequence |
|---|---|
| Naming the estate | Probate, delay, and extra steps to claim any rollover |
| Designation still names an ex-spouse | The ex-spouse may receive the plan |
| No beneficiary named | The plan goes to the estate |
| Assuming the RRIF inherits the RRSP designation | Designations may need to be made again when the RRSP becomes a RRIF |
A designation can be made in the plan contract or in a will, so check both when reviewing who will receive the plan.
TFSA at death, for comparison
| Feature | RRSP at death | TFSA at death |
|---|---|---|
| Taxed on the final return | Yes, unless rolled to a qualifying survivor | No |
| Spouse’s position | Tax deferred until they withdraw | Can take over as successor holder, tax-free |
| Growth after death | Taxable to the recipient | Tax-free only while a successor holder keeps the account |