🇨🇦 Canada · 5 min read · Published 2026-09-07 · Updated 2026-09-07

Written by Jordan Reeves · Editorial review: automated source and figure checks (how we check this)

Sources last verified: 2026-09-07

What Happens to an RRSP When Someone Dies?

Everything turns on who receives it. Left to a spouse or common-law partner as a qualifying beneficiary, the balance rolls over tax-free into their own registered plan. Left to anyone else, the full balance is included as income on the deceased's final return.

60-SECOND ANSWER

An RRSP rolls to a spouse tax-free; left to any other beneficiary, the whole balance is taxed on the final return.

The answer:: A spouse, common-law partner, or financially dependent child or grandchild can receive the plan on a tax-deferred rollover.
The trap:: Naming adult children as beneficiaries. They receive the money, and the estate pays the tax, which can leave other heirs with nothing.
The recommendation:: Check the beneficiary designation against the will, because a mismatch is what produces the unfunded tax bill.

Jump to the detail ↓

Where the AI summary above gets this wrong

"Your RRSP passes to your beneficiary tax-free when you die."

That's surface-true. Here's what it misses:

Only a spouse or dependent child qualifies — Any other beneficiary receives the money while the deceased's final return carries the full balance as income.
The tax and the money can go to different people — A named beneficiary receives the proceeds directly; the estate pays the tax, which falls on the residual heirs.
The rollover needs paperwork — A joint election and a transfer into the survivor's own plan within the prescribed period are required, not merely a designation.

→ See what a full-balance inclusion costs

01 Who can receive it tax-deferred

A spouse or common-law partner named as beneficiary, or receiving the plan through the estate, can transfer the balance into their own RRSP or RRIF and defer the tax. A financially dependent child or grandchild qualifies on narrower terms.

The rollover is not automatic. It requires a joint election and the transfer to be completed within the prescribed period after death, which in practice means the executor and the survivor acting together and promptly.

Source: What to do when someone has died

02 What happens without a rollover

The full balance is deemed to have been received immediately before death and is included in income on the final return. On a substantial RRSP that means most of it taxed at the top marginal rate in a single year.

That is the largest single item in most Canadian final returns, and it is the reason the deemed disposition rules matter more than probate — the wider picture is in the final return.

WORKED EXAMPLE · Try the numbers

Shows: what a given amount of additional taxable income costs you in tax at your marginal rate, and what you keep. Ignores: provincial surtaxes, credits that phase out with income, and any effect on income-tested benefits.

Amount ($)

Your marginal rate (%)

What you keep after tax

$6,700

At a 33% marginal rate, $10,000 costs $3,300 in tax and leaves $6,700.

Source: What to do when someone has died

03 Where the money and the tax separate

A named beneficiary who is not a spouse receives the proceeds directly, outside the estate. The tax on the same amount is payable by the estate, out of whatever else is in it.

Where an RRSP is left to one adult child by designation and the residue of the estate to another, the second child inherits the tax bill on the first child's inheritance. Reviewing designations alongside the will is the fix, and it is part of estate planning in Canada.

Where the plan is left to the estate and the will leaves everything to the spouse, the rollover is still available through a joint election by the executor and the survivor. That route saves an estate where designations were never updated, and it requires the two of them to act inside the prescribed period. The designation form held by the institution overrides the will, and a copy belongs with the estate documents rather than in a bank file nobody will think to look at.

Source: Contributing to an RRSP or PRPP

The split between who gets the money and who pays the tax is the cruellest thing in Canadian estate planning, because it always surfaces between siblings after a funeral. One inherits a registered account, the other inherits the bill for it, and neither was told.