RRIF

Sorry, unless there is a spouse available for the rollover, or a disabled child beneficiary, the entire RIF is taxable upon death.

RRSPs have the same problem; the total remaining lands on the deceased's final return.  This can cause serious problems if the deceased has named beneficiaries of his/her various RRSPs (other than spouse and/or disabled eligible relative) and the companies pay the beneficiaries directly.  Then the final return will show a considerable tax bill and there may not be enough money in the estate to pay it.  Getting the necessary funds from the beneficiaries isn't always easy. 

Jo

The other replies highlight some of the problems with passing away with money in RRIFs

The taxpayer, with advice from accountant, should be establishing a strategy several years before death (yes, I know it can be unexpected at times) to remove RIF funds year by year to pay taxes at lower rates than will be incurred if a large remaining amount is dumped onto the final return.

This does not apply just to RIFs. It applies to any income and capital gains that may have to be added to a final return.

Larry Hancock

Right you are, Larry, a lot of unexpected "income" lands on the final return, even if nothing has been sold.  If there's a surviving spouse, transfers are possible to defer taxes, but that depends on the will and other factors.  Some income can be moved to "rights and things" returns, but that doesn't sop up the RRSP/RRIF problem.

Where it's not fun for the tax preparer is when everything has been "settled" and then the family realizes a final return is required.  

On the "bright side", if the shares in the deceased's stock portfolio decline in value between date of death and date of distribution, that loss - while reported on the T3 estate return - can be carried back to the original final return as an amendment.

Jo

My client was a widow.  I thought it would be all taxable but I thought I should try just in case something changed that I wasn't aware of.

Thanks for answering

Thanks for taking the time to answer!

Pam

Luckily this family hasn't distributed the estate yet.  There is some cash to pay the taxes.

Thanks!
Pam

Thanks for taking the time to answer! And for the additional information.

Pam

You are fortunate, Pam.  When the money's already been distributed and spent, the executor's job becomes much more interesting.

Jo