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When a person dies can the proceeds from her RIF be reported…

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When a person dies...

When a person dies can the proceeds from her RIF be reported as income of her 2 daughters. who are her heirs in her will? The daughters are able bodied adults.

Accountant's Assistant: The Accountant will know how to help. Please tell me more, so we can help you best.

One of the daughters has been told that rather than reporting the RIF income in her mom's date of death return it can flow through an estate return to them, thus saving a significant amount of taxes. I can find no literature from CRA or elsewise to support this.

Submitted: 4 months ago.Category: Tax
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12/7/2017
Tax Professional: Barbara, Enrolled Agent replied 4 months ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 5,746
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

The Estate is liable to pay the deceased’s taxes which include those resulting from the RRSP/RRIF deemed receipt at death. If an RRSP/RRIF has designated beneficiaries, the proceeds are paid directly to them but the taxes are still paid from the Estate. If there are not enough assets in the Estate to cover the tax liability, then Canada Revenue Agency (CRA) will go after the RRSP/RRIF beneficiaries for payment.

https://turbotax.intuit.ca/tips/canada-inheritance-tax-laws-information-463

http://mti-cpa.com/tax-on-rrsprrifs-at-death-does-the-estate-or-rrsprrif-beneficiary-pay/

Please let me know if I can assist you further.

Thank you and best regards,

Barb

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Tax Professional: Barbara, Enrolled Agent replied 4 months ago

Just following up with you to see if you have any other questions. If so, please let me know so I can continue to help you.

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Customer reply replied 4 months ago
When you say the estate must pay the tax on the RIF do you mean the RIF is
taxed in the date of death T1 or is a separate return, presumably a T3,
filed to report the RIF and pay the tax on it?Can you confirm that it is not possible for each daughter to include 50%
each their own T1s? This would be the most tax advantageous method to
handle this RIFThank youDon Bishop
Tax Professional: Barbara, Enrolled Agent replied 4 months ago

When a person passes away, his or her executor files a tax return for the last year of the deceased's life. That is a T1 tax return. Executors are sometimes surprised to find that they may have to file a tax return for the estate itself, as opposed to for the deceased person. A tax return for an estate or trust is a T3 return.

https://estatelawcanada.blogspot.com/2010/09/what-is-t3-tax-return.html

Even though the proceeds from the RRIF are paid to the beneficiaries, the estate is responsible to pay the tax. Only if there are not enough assets in the Estate to pay the tax liability will the beneficiaries be responsible for payment of the taxes.

Thank you.

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