Please note that the following document, although believed to be correct at the time of issue, may not represent the current position of the CRA.
Prenez note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'ARC.
Principal Issues: Whether RRSP proceeds not exceeding the amount deemed received and included in the deceased annuitant's income at death can be received tax free by a former spouse who is the designated beneficiary of the RRSP.
Position: Yes.
Reasons: The former spouse can receive RRSP proceeds that do not exceed the FMV of the RRSP at the time of the annuitant's death on a tax-free basis. The tax liability arising from the deemed receipt of an amount under subsection 146(8.8) and the corresponding inclusion of that amount in income under subsection 146(8) and paragraph 56(1)(h) is generally satisfied using property of the deceased annuitant's estate.
2026 STEP CRA Roundtable – June 2, 2026
Question 7. RRSP and Named Beneficiary
An individual is the annuitant of an unmatured RRSP. The designated beneficiary of the RRSP is a former spouse of the annuitant. Upon the death of the annuitant, the fair market value of the RRSP would generally be included in the deceased’s final income tax return. To the extent that the payment of the RRSP proceeds to the former spouse does not exceed the amount included in income of the deceased annuitant, no tax would be withheld on the payment of the RRSP proceeds to the former spouse, and the former spouse would receive the full amount on a tax-free basis. As a result, the deceased’s estate (and ultimately its beneficiaries) would bear the full tax liability associated with the RRSP, while the designated beneficiary of the RRSP would receive the proceeds of the RRSP on a tax-free basis.
Does CRA agree?
CRA Response
Where the annuitant of an unmatured RRSP dies, subsection 146(8.8) of the Income Tax Act (footnote 1) deems the annuitant to have received, immediately before death, an amount as a benefit out of or under the RRSP equal to the fair market value (FMV) of all the property held in the RRSP at the time of death. Pursuant to subsection 146(8) and paragraph 56(1)(h) this amount, together with any other amounts received by the annuitant from the RRSP in the year, generally has to be included in computing the deceased annuitant’s income in the year of death. The tax liability of the deceased that arose as a result of such income inclusion is generally settled using property of the estate.
Pursuant to subsection 146(8), a taxpayer is required to include in their income for a taxation year all amounts received in the year as benefits from an RRSP. The definition of “benefit” in subsection 146(1) determines what portion of an amount received out of an RRSP (if any), will be a benefit for the purpose of applying subsection 146(8). With respect to the amounts received by a beneficiary of an RRSP, pursuant to paragraph (a) of the definition of benefit, the portion of the amount that was deemed to have been received by the deceased annuitant, pursuant to subsection 146(8.8), is excluded. As a result, when the designated beneficiary (the former spouse in this case) receives an amount from the RRSP, only the portion that is not an amount deemed to have been received by the deceased annuitant by virtue of subsection 146(8.8) constitutes a benefit out of or under an RRSP. Consequently, the former spouse would receive the RRSP proceeds, equal to the FMV of the RRSP at the time of the annuitant’s death, on a tax-free basis, while the resulting tax liability arising from the deemed receipt of an amount under subsection 146(8.8) and the inclusion in income of the amount under subsection 146(8) and paragraph 56(1)(h) is generally settled using property of the estate.
In general, subsection 160.2(1) provides that where a taxpayer other than the annuitant of the RRSP, such as a designated beneficiary, receives an amount all or part of which is described in paragraph (b) therein, the taxpayer is jointly and severally liable with the deceased annuitant for the portion of the deceased annuitant’s income tax that is attributable to the amount.
Todd Baldwin
2026-108901
FOOTNOTES
Note to reader: Because of our system requirements, the footnotes contained in the original document are shown below instead:
1. All legislative references in this document are to the Income Tax Act, R.S.C. 1985, c.1 (5th Supp.), as amended.
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