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Monday, July 31, 2017

How does the named beneficiary of an RRSP go about collecting it?

In any given estate, there is usually only one lawyer involved, and that lawyer works for the executor. This means that other people such as beneficiaries and family members generally don't have anyone in particular they can turn to for information and advice about how the estate is unfolding. They are supposed to get their information from the executor, of course, but the executor may not always know the answer. And sometimes the executor is not especially communicative.

As a result, I receive a lot of questions from beneficiaries about how things are supposed to work in an estate. They want to know what steps they are supposed to take in order to receive their bequests. Something that seems to cause a lot of questions is an RRSP or RRIF that is left to a named beneficiary. The beneficiaries expect the executor to deal with it. The executor is told by the estate lawyer that he or she does not have to deal with it. This leaves the beneficiaries in limbo.

What exactly is the procedure when a deceased person leaves an RRSP or RRIF? Who is supposed to ensure that it is paid to the right person? The answer may surprise some people in the sense that the RRSP or RRIF has almost nothing to do with the executor.

When the RRSP or RRIF names a beneficiary (and by this I mean it names a specific person and not the deceased's estate) then it is not part of the estate. This means it's not the executor's job to deal with it. The executor should advise the named beneficiary that the policy exists (and where it is located) and provide a copy of the Death Certificate or the Funeral Director's Statement of Death. After that, it's up to the beneficiary to arrange for payment. The beneficiary should go to the bank or the financial advisor directly and arrange for the RRSP or RRIF to be paid.

The payment will go directly to the named beneficiary from the bank. It won't be routed through the executor or the estate.

Most executors handle this properly. A few do not. Within those few who do not, some attempt to collect the RRSP or RRIF into the estate and cause all kinds of fuss when the bank won't comply. The executors on the other end of the scale won't do anything at all, including giving a copy of the Death Certificate, because they've been told the RRSP or RRIF is not their responsibility.

If beneficiaries are aware from the start that it is their own responsibility to contact the bank and arrange for the payment of the RRSP or RRIF, things will go much more smoothly for them. It can be a real source of frustration to wait for many months for an estate to be distributed just to find out that the RRSP or RRIF isn't even in the estate.

Tips for a beneficiary who is named on an RRSP or RRIF:
- take your I.D. with you to the bank
- take a copy of the Death Certificate or Funeral Director's Statement of Death with you
- be prepared to give your social insurance number
- be prepared to give instructions regarding whether you want a cheque or a direct deposit
- allow the bank enough time to process the paperwork after you notify them - you won't get your money overnight


  1. From my experience as an executor AND a named RRSP beneficiary, I don't understand why an executor would ignore RRSPs/RRIFs with named non-spousal beneficiaries because of the income tax consequences for the estate. The executor should at least be aware that the redeemed value of the RRSP/RRIF is counted as part of the deceased's income as of the date of death, so that it is taxable to the estate.

    If not immediately redeemed,any increase in value is taxable to the beneficiary.

    That tax consequence could come as quite a shock to the executor.

    1. It rarely works well when an estate administration is dragged out for no good reason. You have given an excellent example.

      I always try to get the executors of all but the most simple estates to work with an accountant on the administration so that the executor will receive detailed and accurate tax advice.


  2. I echo the other poster's comments.

  3. I have dual citizenship born Canadian but now living in U.S. My Ontario, Canada RRSP has my 2 Canadian children still living in Ontario as beneficiaries. The RRSP is the only Canadian I still need a will. My U.S. assets are dealt with in a trust but I can't put any Canadians assets in it. Any help would be appreciated. Thanks

  4. Hi there,
    We are having an issue with this right now. My uncle passed away without a will but named me the beneficiary for his rrsp. The bank is saying they cannot release the funds as the estate writes the cheque for it and both executors have to sign first. Btw we are in Alberta and the bank is Scotia bank. Here's the second part of the issue.. the one executor will not sign unless we tell her what we are doing with the money and if we do not disperse it fairly in the family she plans on taking us to court. Is there anything she can take us to court for? Secondly, is the bank lying about who writes the cheque and is there anything we can do about it?
    Hoping you can help.

    1. If you're named as the beneficiary on the RRSP then it has nothing to do with the executors. It should be paid right to you by the bank.

      I doubt the bank is "lying". Why on earth would they? They might be misinformed but lying? Seems a bit far-fetched.

      Something is very odd here. Is there no lawyer involved who can explain the law to anyone? Is there something in the will that talks about distributing the RRSP among family members? If not, why is the one executor even asking what you're doing with it?

      Find a lawyer who knows about estates who can look at the will and the documentation from the bank. Most likely he or she can clear up the problem with a call or letter to the bank.


  5. My ex-husband has me named as beneficiary on his RRSP. He passed away last March and I just found out about the RRSP when the executor contacted me mid Nov. He told me about the RRSP which I wasn't aware of and said the bank wouldn't release the RRSP to the estate. He asked that I sign over the RRSP so he could pay the taxes on the estate with it then the estate and I could split the remaining. I did some reading on your site and don't think he can do this; I called the bank yesterday and the rep asked if I was going to renounce the RRSP as he has the documents from the executor for this. I told him no I will not, he said that he will have to contact the estate dept about this and get back to me. What's my next step? how long do I wait?

    1. Give him a day or two. He should be able to get in touch with his legal department in that time.

      I agree with you that the executor cannot force you to renounce the RRSP. If you are the named beneficiary on the RRSP then it's yours. But the full answer isn't that simple, of course.

      Keep in mind that the estate should pay the tax on the RRSP even if you are the one who gets the RRSP. However, if there is not enough in the estate to pay that tax, Canada Revenue Agency WILL come after you personally for that tax.

      The executor may be trying to do this because there is no other money for tax. If so, it doesn't hurt you to co-operate in the payment of tax on the RRSP. Just be careful you aren't paying tax on other estate assets too.

      Get as much information as you can from the bank about how much is in the RRSP and how much tax they expect will become owing. If you can get a copy of the estate inventory, that might also help you figure out if there is other money in the estate that the executor could use to pay the tax.



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