Pitfalls, Protection and Official Sources
RRSP, RRIF and TFSA beneficiaries: successor holders, spousal rollovers and the Quebec will rule
What happens to an RRSP, RRIF, TFSA or FHSA when the holder dies, how beneficiary and successor holder designations work, the spousal rollover, and why Quebec designations go in a will.
When the holder of an RRSP or RRIF dies, the account's full value is generally included in income on the final tax return, unless it passes to a surviving spouse or common-law partner (or, in some cases, a financially dependent child or grandchild), who can roll it into their own plan tax-deferred. A TFSA is different: naming your spouse as successor holder lets them simply take over the account, tax-free and without using their own room, while other beneficiaries receive the value at death tax-free (later growth is taxable). Designations are usually made on the plan form, except in Quebec, where for plans that are not insurance contracts they are generally made in a will.
This guide is part of the mistakes and official sources hub. Estate law is provincial and the details matter; for a will or an estate, consult a lawyer, or a notary in Quebec. General information only.
What happens to each account on death
| Account | Spouse or partner named | Someone else named | No designation |
|---|---|---|---|
| RRSP / RRIF | Tax-deferred rollover to the spouse's RRSP, RRIF or annuity | Value taxed on the deceased's final return; beneficiary receives the funds | Paid to the estate, taxed on the final return; may be subject to probate |
| TFSA | As successor holder: takes over the TFSA intact. As beneficiary: can make an exempt contribution within time limits | Receives value at death tax-free; growth after death taxable | Paid to the estate |
| FHSA | As successor holder: can take over if eligible, or transfer to own RRSP | Value taxable to the beneficiary | Paid to the estate, taxable |
The tax on an RRSP or RRIF paid to a non-spouse beneficiary falls on the estate, while the money goes to the beneficiary. If the estate's other assets are not enough to pay that tax, beneficiaries can be jointly liable. Wills should account for this so that the after-tax result for each heir is what you intend.
Worked example: RRIF passing to a child
An illustrative widowed parent dies with a $300,000 RRIF naming an adult child as beneficiary, and a $200,000 house left to a second child in the will.
| Step | Amount |
|---|---|
| RRIF value included on the final return | $300,000 |
| Tax on it (illustrative, mostly at top combined rates) | roughly $130,000 |
| Paid by | The estate, i.e. from the house |
| Child 1 receives | $300,000 RRIF directly |
| Child 2 receives | House value less the tax: about $70,000 |
The designation produced a very unequal result. Equalizing clauses in the will, or different designations, can fix this; it is a common reason to review designations with a professional.
TFSA: successor holder vs beneficiary
| Successor holder | Beneficiary | |
|---|---|---|
| Who can be named | Only a spouse or common-law partner | Anyone, or a charity |
| What happens | Becomes the new holder of the same TFSA | Receives the value |
| Effect on their own room | None; the account is simply theirs | A surviving spouse can contribute the amount as an "exempt contribution" (Form RC240) within the time limits, without using room |
| Tax | None on the value or later growth | Value at death tax-free; growth after death taxable |
Naming a successor holder is simpler for a spouse than naming them as beneficiary: no forms, no deadlines and the account keeps its investments.
Quebec: designations in a will
Under Quebec law, a beneficiary designation can generally be made on the plan itself only when the plan is an insurance contract or annuity (for example segregated fund RRSPs from an insurer). For RRSPs, RRIFs and TFSAs held with banks, brokerages and fund companies, the designation is usually made in the will. In practice:
- Your Quebec will should name who receives each registered plan and, for a TFSA, your spouse as successor holder if that is your wish.
- A notarial will in Quebec does not need to be probated, which can make settlement faster.
- If you move to or from Quebec, review your designations, because a designation that works in one province may not in another.
When to review designations
- Marriage, start of a common-law relationship, separation or divorce. In several provinces, marriage or divorce can affect a will or designation, and designations on plans may survive a divorce unless changed.
- Birth or adoption of a child.
- Death of a named beneficiary.
- Opening a new plan or transferring one: the old designation does not move with a transfer; set it up again at the new institution.
- Converting an RRSP to a RRIF: confirm the designation carries over or make a new one. For a RRIF, you can name your spouse as successor annuitant, so payments simply continue to them.
Minors and dependants
Naming a minor child directly as beneficiary of a large sum can require a court-supervised guardian of property or result in the funds being paid to the province's public guardian until the child is an adult. A trust in your will is often a better route. A financially dependent child or grandchild may benefit from special rollovers (for example to an annuity to age 18, or to an RDSP for a dependant with a disability). These rules are technical; get advice.
Frequently asked questions
Do registered accounts go through probate?
Accounts with a valid beneficiary designation (outside Quebec) are generally paid directly and bypass probate. Accounts paid to the estate may be subject to probate fees, which vary by province.
Can I name my estate as beneficiary?
Yes, and sometimes it is deliberate, for example to fund a trust. The account then passes under your will.
Is a TFSA left to my children taxed?
The value at the date of death is not taxed. Income earned after death until payment is taxable to the recipient.
Does a spousal rollover require the spouse to be the named beneficiary?
Not always; rollovers can sometimes be arranged through the estate. Naming the spouse is the simplest route.
Official sources
- Canada Revenue Agency — death of an RRSP annuitant, RRIF annuitant or TFSA holder; Form RC240
- Revenu Québec — final returns and registered plans on death in Quebec
- Chambre des notaires du Québec — wills and estates in Quebec
- Justice Laws Website — Income Tax Act subsections 146(8.8) and 146.2 (death provisions)
