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Estate planning in Canada: What happens to RRIFs after death?

Many people work hard all their lives to be able to enjoy their retirement years, but also to be able to leave something for their loved ones after they pass away. Part of good estate planning in Canada means knowing how to best maximize investments such as a Registered Retirement Income Fund (RRIF). But what happens to an RRIF after someone dies? The answer basically hinges on two things: whether a beneficiary is named and, if so, who that beneficiary is.

There can be two different beneficiaries for an RRIF and a Registered Retirement Savings Plan (RRSP). Naming a beneficiary is vital if he or she is to receive the most from a late loved one's RRIF. If there isn't a beneficiary, an RRIF will be privy to estate probate fees and its value will be seen by Revenue Canada as income on the deceased person's final taxes. What's left will go to a beneficiary.

Naming a beneficiary will ensure an RRIF is not included in any probate fees, nor will its value need to be included in a final tax refund if the beneficiary is a spouse, a minor child or grandchild (under the age of 18) or any child or grandchild of any age who is infirm and financially dependent. If a spouse is a named beneficiary, he or she would be able to assume takeover of an RRIF entitling him or her to RRIF payments. If a spouse is not a beneficiary, the RRIF will become null and void and any investments will be sold off.

There are many things to think about when it comes to estate planning in Canada. Obtaining legal counsel might ensure those planning their estates get advice regarding such issues as RRIFs and RRSPs and how they figure under the law in an estate plan. People likely want to make sure they have done all the things necessary like naming a beneficiary for these investments ensuring their loved ones are taken care of after they pass away.

 

 

Source: getsmarteraboutmoney.ca, "What happens to your RRIF when you die", Accessed on Jan. 19, 2018

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