The person who made the LLP withdrawal dies
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The person who made the LLP withdrawal dies
Usually, if the person who made the LLP withdrawal dies, the legal representative (administrator) has to include the LLP balance in the deceased person's income for the year of death. If the deceased person contributed to an RRSP in the year of death, the representative can designate the contributions as a repayment under the LLP using Schedule 7, RRSP and PRPP Unused Contributions, Transfers, and HBP or LLP Activities. This reduces the LLP balance that has to be included in the deceased person's income.
Note
An LLP student who dies may not have been the person who made the LLP withdrawal. If this is the case, the person who made the withdrawal makes the required LLP repayments over the usual 10-year period.
LLP election on death
If, at the time the person who made the LLP withdrawal dies, and the deceased had a spouse or common-law partner who is a resident of Canada, that spouse or common-law partner can elect jointly with the deceased person’s legal representative (administrator) to make the repayments and to not include the LLP balance in the deceased person’s income. If the surviving spouse or common-law partner is also the representative, he or she makes the election.
To make this election, the surviving spouse or common-law partner and the deceased person’s legal representative sign a letter and attach it to the deceased person’s income tax and benefit return for the year of death. The letter should state that an election is being made to have the surviving spouse or common-law partner make the repayments under the LLP, and to not have the income inclusion rule apply to the deceased person. The deceased person’s LLP balance then becomes the survivor’s LLP balance. The surviving spouse or common-law partner makes the repayments to his or her own RRSPs or PRPP or both.
Note
If this election is made and the deceased person had not made a repayment for the year of death, no repayment will be required for that year for the deceased.
If the surviving spouse or common-law partner has no LLP balance of his or her own at the time the person who made the LLP withdrawal dies, the survivor is deemed to be the LLP student for the LLP balance taken over from the deceased person. The surviving spouse or common-law partner will have to make repayments to his or her RRSP over the normal 10-year repayment period, determined as though the year of his or her first LLP withdrawal is the year the person died. For more information on when the repayment period will begin, see When and how to make a repayment.
If the surviving spouse or common-law partner wants to make LLP withdrawals, the LLP balance taken over from the deceased person will limit the amount he or she can withdraw.
The survivor's total limit will be $20,000 minus the LLP balance taken over from the deceased person. The annual LLP limit for the year of death will be $10,000 minus the remaining LLP balance of the deceased person.
Example
Isabelle died in 2016. At the time of death, she had an LLP balance of $7,200. Her repayment period began in 2015. Her husband Bruno is her legal representative (administrator).
Bruno decides to elect to make the repayments. When he prepares Isabelle’s final income tax and benefit return for 2016, he does not include her LLP balance in her income. Instead, he writes a letter explaining that he is electing to make his late wife’s LLP repayments. He signs the letter and attaches it to her final income tax and benefit return. Bruno becomes an LLP participant in 2016 having an LLP balance of $7,200.
If Bruno is not entitled to the education amount as a full-time student for at least three consecutive months in both 2017 and 2018, his repayment period will begin in 2018. He may choose to make repayments in 2016 or 2017, in which case they will be applied to the balance to reduce or eliminate the required repayment in 2018 and subsequent years. For more information, see If you repay earlier.
If Bruno wants to participate in the LLP in 2016 for his own education, his total LLP limit would be $20,000 minus the remaining LLP balance from Isabelle. As well, his annual LLP limit for 2016 would be $10,000 minus the remaining LLP balance from Isabelle.
If Bruno did not make the election, he would have to include $7,200 as income on line 129 of Isabelle's final income tax and benefit return for 2016.
If the surviving spouse or common-law partner already had an LLP balance of his or her own at the time the person dies, the deceased person's LLP balance is added to the survivor's LLP balance. This may cause the survivor's LLP balance to be more than the $10,000 annual limit or the $20,000 total limit. If this occurs, we will not include the excess in the income of either the survivor or the deceased person. The surviving spouse or common-law partner has to repay the new balance over his or her own repayment period.
Example
Irene died on June 10, 2016. At the time of her death, she had an LLP balance of $7,000 to be repaid. Irene’s common-law partner Paul is the estate’s administrator (legal representative). He decides to make Irene’s LLP repayments. He has his own LLP balance of $14,000, and his repayment period began in 2016. Paul will add Irene’s LLP balance of $7,000 to his own LLP balance of $14,000. However, Paul is only required to make a repayment of $1,400 in 2016 based on his own LLP balance of $14,000 at the beginning of the year. If he pays only the required amount in 2016, his minimum LLP repayment in 2017 will be $2,177 ($19,600 ÷ 9).
- Date modified:
- 2016-10-25