Rollover is not the only option
A number of years ago a client called the day after his wife passed away. He wanted to come in as soon as possible to transfer her RRSP over to his name. A few months later we were talking and he said he shouldn’t have made such a quick decision. It would have been better if funds had been paid out and taxed to his late wife. Based on their tax situation, he was right.
Dealing with members we have a tendency to think that the RRIF should always continue in the spouse’s/common-law partner's (CLP) name or the RRSP needs to be rolled over. That is not always the best tax advise.
The funds within a trusteed RRSP or RRIF can remain within the plan in a tax exempt status until December 31st of the year following death. That provides over 12 months if the annuitant died in December and 23 months if s/he died in January, lots of time for the surviving spouse/CLP to talk with a tax planner or accountant to discuss the best tax handling of the funds.
Even if the spouse/CLP is named as beneficiary, s/he can direct the RRSP/RRIF to be paid out which makes the the value as at date of death taxable to the deceased. By using a T2019(RRSP) / T1090(RRIF), the estate representative and accountant can then move some of those taxable funds to the surviving spouse/CLP who may then recontribute those funds to an RRSP or RRIF to defer taxes. This allows for any portion of the RRSP/RRIF funds to be taxable to the deceased who may be in a lower tax bracket than what the surviving spouse will be in in the future.
So don’t be in a rush to change that RRIF name to the successor annuitant or to transfer the RRSP. Have the surviving spouse/CLP or estate rep check with an accountant or tax planner to ensure they have considered all possibilities.