RRSP Beneficiaries and Tax Liabilities

Financial Institutions issuing RRSPs or RRIFs cannot withhold or remit taxes when paying out proceeds from a deceased person’s RRSP or RRIF. If you are the sole beneficiary named on an RRSP or a RRIF (presuming it is not being rolled over), Canada Revenue Agency can hold you responsible for the tax liability, because you and the deceased’s estate are jointly liable for it.

While CRA typically assesses the tax to the deceased’s estate first and only goes after the beneficiary if the estate is out of money, they are not actually required to do so by the Income Tax Act.

RRSP/RRIF beneficiaries should obtain confirmation that the payment to the executor of an estate is a payment of tax, or issue the cheque payable to Receiver General directly. Professional tax advice should be sought before making any payments, whether to the estate or to CRA.

Source: Jamie Golombek. “When an RRSP beneficiary faces a tax liability.” Accessed August 1, 2017.  http://www.advisor.ca/retirement/retirement-news/when-an-rrsp-beneficiary-faces-a-tax-liability-217787