What Happens to Your RRSP When You Die?

For a lot of Canadians, the RRSP or RRIF is among the biggest things they will ever leave behind. And two parts of what happens next surprise almost everyone.

Surprise one: the will usually does not decide

In common-law provinces, your RRSP, RRIF or TFSA is generally paid to the beneficiary named on the account, directly, outside the will and outside probate. In Quebec, designations on these accounts are generally not recognised, so they typically flow through the succession instead, though a beneficiary named in a life insurance policy is still paid directly.

Surprise two: outside the will is not outside the tax

When you die, the CRA generally treats the full value of your RRSP or RRIF as income on your final tax return. The big exception is a spouse or common-law partner: where they are the beneficiary, the money can usually be transferred into their own registered plan and the tax deferred. Similar relief can apply for a financially dependent child or grandchild in certain circumstances. The detail matters, so beneficiaries should get proper advice before touching anything.

The trap in plain terms: the account can go to one person while the tax bill lands on the estate. If the two are not the same people, a will drafted without that in mind can produce a genuinely unfair result. It is one of the best reasons to have your will and your designations reviewed together.

The TFSA is gentler

A TFSA is generally tax-free up to its value at the date of death. A spouse named as successor holder can simply take over the account itself. Growth after death can be taxable, so again, worth sorting promptly.

What to do about it

Two jobs. One: check the named beneficiary on every registered account and policy this week, especially after any big life change. Two: write down every account, provider and beneficiary in one place your family can find. That second job is what The Estate Organiser makes easy, and the free toolkit below is the place to start.

Related guides

• What Is a Beneficiary Designation?
• Does a Will Cover Everything?

Get the Free Executor Toolkit

A complete Day 1 to Month 12 roadmap. The common mistakes that catch families out. Notification letters and an expense tracker. Free and instant.

Educational content only. This is general information, not legal, financial or tax advice. Estate laws vary from province to province. Please speak to a qualified lawyer, notary or adviser about your situation.