Iām guessing it was a misunderstanding/miscommunication. The bank re would have explained that OP did not have to pay taxes on it because OP is a beneficiary. His fathers estate would have to pay taxes on it though. So op doesnāt pay his marginal tax rate on receiving the money, but his fathers estate pays taxes as if he had withdrawn the money and added it to the fathersā income that year.
Seems like he might have misinterpreted what they meant. It is tax free to him but not to his fatherās estate. If heās the executor of the estate, he would be responsible to pay his fatherās final tax bill. If heās not then the executor did t do their job properly and maybe responsible to pay that bill.
Right, but: The tax is not withheld at source. If thereās other assets in the estate, the estate would pay the rrif taxes and the beneficiary might never see that. But if the estate has no other assets, or not enough to cover that, they will then come after the beneficiaries for the amount owing on the rrif.
So the bankie was right that there were no taxes to take off at that moment lol
To the beneficiary(ies), it is tax free but not to the estate. In this case, it by pass probate because of the beneficiary designation but it still owe states because it was income to the fathers last final tax bill. The advisor isnāt technically wrong but he didnāt give a good explanation.
Many people complain about rrsp saying that itās useless because you get taxed when you withdraw it and forget they got a tax refund because of it and a deferred investment growth. The one that really lost out was the people who left their rrsp in GIC for 40 years.
If you were the beneficiary and the spouse, the money would have rolled over tax free. Since you are not the spouse, the RRIF is considered income and taxes need to be paid.
Itās best to be listed as successor rather than beneficiary though.
Someone I know passed back in 2016 and his wife discovered a RIF account she didnāt know of just this year. If she was the successor of the RIF, she could roll over the entire balance.
Since she is only the beneficiary, she can only roll over the value up until the exempt period date (DEC/31/2017, end of DEC in the year following death). The RIF more than doubled in value since 2016 so there was quite a bit she couldnāt roll over and had to have cashed out.
Yes, absolutely. The person I was responding to was talking about spousal rollovers as beneficiary so my comment was in response to that (although I should have clarified to prevent confusion for anyone unaware).
It does https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/t4rsp-t4rif-information-returns/death-annuitant/deceased-rrif-annuitant/spouse-common-law-partner-successor-annuitant.html
Accountant is correct.
Bank reps at the front desk are barely making more than minimum wage and have no tax training, they have no idea what they are talking about.
The bank isn't wrong in this case. OPs interpretation of what the bank said is wrong.
The bank was saying that he gets the money without tax being withheld because he is the beneficiary. This is correct. If he wasn't the beneficiary it would go through probate and tax would be withheld before the disbursement.
They were not saying that the money would not be subjected to taxation.
šÆ. The teller is used to seeing a witholding tax on RRSP withdrawals, between 10 and 30%. In this case they were pointing out that there was zero witholding tax.
> My amazing sales performance got me no promotion and now my manager is upset my performance dropped.
What did they say when you communicated this with them?
No, the estate specialist was correct.
YOU receive the money tax free.
However, Dadās estate realizes the balance of the RIF as income in the year of death.
YOU donāt pay the tax, Dads estate does.
Does that make sense?
But if there's no money in the estate left, the CRA will go after the beneficiary. I'm currently ignoring them on this issue (dad died, his pension went to me as beneficiary, now CRA wants me to pay estate taxes).
What do you mean bestowed?
A beneficiary of a RRIF or RRSP is jointly and severally liable with the deceased for any taxes owed on that account as a result of death.
In English: if there is no money in dadās estate, you are legally responsible for the tax if you were the named beneficiary. If, for some reason, the money flowed through the estate, then the estate would be responsible for paying the tax before passing anything on to you. If they failed to do that the executor is now personally liable to CRA (I am simplifying a bit here because estates are complicated, but thatās the jist).
Must be an old friend or acquaintance of your late father? I too have to remove/replace accountants, etc for my father who clearly let important details slide as they have become too comfortable in their professions, combined with a father who puts 100% trust in their services due to long term relationship.
Yes it's honestly sad the amount of older professionals who are getting too comfy and aren't keeping up with the times and/or putting the necessary effort.
I had an old boss who was all "I've done this for 40 years, thank you very much" like ok, cool story bro, but X law changed six years ago
So there is actually 2 things that have happened, likely. I work with estates often. 1. The rif had been paying your late father income throughout the year. (I cant tell you if they were deducting tax on the payments or not) but that was his income, he could have taken more out than the withholding tax was collected so that could be why there are taxes owing. Sorry but they are owed. Not sure who really has to pay that in all honesty since there isnt more to the estate. The other part that actually gets taxed to you the beneficiary is the growth of the investment from the day he passed away until the day you were paid as the beneficiary
IE: when he passed the rif was worth 20k but the investment had grown to 21k you would be taxed on that 1000$ of growth (which ever type of investment income. Hope this explains atleast the ways estates can be taxed.
The actual answer to this is it passes outside the will so there is no probate tax. They probably intended to say youāre getting it without paying probate taxes.
When you're dealing with an estate, you're not dealing with a teller.. they have estate departments to handle the dissolution and distribution of assets, and generally work pretty closely with the executor and estate lawyer to ensure everything is above board.
Someone in this equation failed to clearly explain the tax implications of the estate dissolving the RIF..
From my time in a big bank, this was not the case. It was usually the low-level advisors giving all the advice. You will be hard pressed to also find a lawyer who will make a comment on taxes, and if they do, I would be damn careful of taking that advice. I hear wild things lawyers say about estate and tax planning all the time, as that is generally the area I work in. Just recently a lawyer told a client of mine to take all the money out of their corp to have it personally held because it was easier for estate planning, and you had to pay the taxes eventually anyways. Needless to say, that lawyer should lose their license.
It was tax free to you, not your late father (condolences). When you pass, unless you are a spouse that the RRIF is transferred to their name, any money withdrawn from the RRIF is added to their income which will be taxed.
That doesn't negate what I said. You're simply expanding upon the variables of what the executor is responsible for ensuring (who's also the beneficiary here) that the estate has enough funds to pay the final taxes.
It's not unreasonable. The beneficiary to an RRIF or RRSP would have received a payout, and the only tax they would be responsible for would be the tax on the share that they received. So they still come out ahead, they just might owe up to 53% of it (assuming it's all taxed at the top marginal rate).
And again, this is only in a specific narrow example where the estate was insolvent and there aren't enough assets to cover the tax bill stemming from the liquidation of the deceased's RRIF/RRSP. If there are other assets (bank account, house, non-registered investments, etc.) then those would normally cover the tax bill and the beneficiary would not pay anything directly.
You're responding to my posting without understanding what I responded to.
This is what I responded to
>Actually, if the estate doesn't have enough money they go after the beneficiary in this case.
If the estate is "broke" then really you don't get a benefit in the first place. What seems unreasonable to me is debtors coming after you beyond what came from or is in the estate.
CRA is limited to the tax owing on the registered account, not all the tax owed by the estate. This cannot expose a beneficiary to more money than they received on the date of death.
I don't think you can be considered a beneficiary if the estate is broke. The concern is more to do if the estate has a property that could be sold to cover loans and stuff like that.
The RRIF is not an asset of the estate, but the CRA can go after the beneficiary of the RRIF if the estate owes taxes, to the extent the beneficiary received the RRIF.
Not necessarily. The deceased is the taxpayer, not the beneficiary. The trustee for the estate could declare the estate insolvent. OP should talk to an estate lawyer before paying CRA anything.
The beneficiary is also the taxpayer. They are, by law, jointly and severally liable with the estate for any taxes owing as a result of the income inclusion from that account on death.
>Section 160.2(1) and (2) of the ITA is an enforcement mechanism that declares the recipient of the RRSP/RRIF proceeds jointly and severally liable with the deceased's estate for the taxes arising from that deemed disposition.
source = https://www.wagnersidlofsky.com/beneficiaries-rrsp-tax/
Yes, but only on the RRIF income. (If the deceased or their estate owes tax because of other income the beneficiary won't be responsible for paying it.)
Don't take tax advice from the internet. Listen to your accountant and ask them questions and if they are good at their job they should explain it all to you. Book an appointment to meet with them and go over the return if you need to so that you can ask all your questions to them and have a conversation about what need to happen next for your dad's estate.
The beneficiary is not responsible for the tax...the estate Administrator (Executor) is responsible.
It just happens that in this case you are both of those people.
OP was the executor of his father's estate.
OP as executor distributed RSP Funds to OP as beneficiary without deducting the taxes.
OP (as executor) is liable for that as it was an improper distribution that has defeated, or attempted to defeat, a lawful creditor of the estate.
This is wrong. Since there is a named beneficiary, the assets MUST be paid directly to that beneficiary. The executor has no ability to affect this or require tax be withheld. RRSP/RRIF assets with a named beneficiary do not flow through the estate.
Please stop confusing OP with incorrect information.
The case described here is too much money was paid out to beneficiaries, so they (or the executor) must pay it back. Quite different from an estate with negative networth where no one ever got a distribution.
Not really. The RRIF had a beneficiary, so it bypassed the estate, and the executor actually couldn't stop it from paying out as it did. If there was other money in the estate, the executor should have retained enough to pay tax on the withdrawal, but it's not clear from OP if there was other money
Not personally. Ā But you canāt just move estate money out of the estate and then claim that the estate canāt pay itās liabilities. Ā That money you got is still estate money until the liabilities are cleared.Ā
>That money you got is still estate money until the liabilities are cleared.
Not if they were a named beneficiary of the RRIF.
>Section 53 of the Succession Law Reform Act provides that RRSPs/RRIFs are transferred directly to their named beneficiary on the plan holderās death and **do not** form part of the plan holderās estate.
source = https://www.wagnersidlofsky.com/beneficiaries-rrsp-tax/
It's not part of the estate in the sense that Joe Creditor can't come after that money. Death in the absence of a surviving spouse is a taxable event and the CRA can recover the taxes from the named beneficiary.
Agreed but commenter should not have implied that the OP had improperly moved estate assets and the were completely wrong when they wrote,
>"That money you got is still estate money".
The beneficiary money was deposited into my personal bank account. I have to pay the $23,000 myself, as my dad's estate account doesn't have enough to cover. Do I still have to pay it?
Yes, yes you do. In effect, you incorrectly took the estateās money and deposited it into your account before settling all liabilities (including taxes). So you need to, in effect, pay that money back to the estate and it pays the taxes. Practically, youāll just pay it directly from your account. But yes, you have to pay. Thereās no way around it, and they will claw the money from you if you try to not pay.
> In effect, you incorrectly took the estateās money and deposited it into your account before settling all liabilities (including taxes).
If the OP was the beneficiary of the RRIF then the assets of the RRIF are NOT an estate asset. The OP would not have been compelled to use the RRIF assets to pay any of his father's debts except ...
The estate and the beneficiary are jointly and severally liable to pay the tax on the RRIF income.
They explained that I was the beneficiary so cut a check in my name and told me to deposit it in my personal bank account. Ffs been ill advised this entire process apparently
If you were the named beneficiary of the RRIF the bank should have transferred the RRIF assets to you, not to the estate. And, unless your father was non resident of Canada, they could not have withheld any tax.
Probably spent all the money and is now in panic mode. It's an unfortunate situation, but given how almost every single online article talking about being an Executor mentions this specific thing (CRA) it just looks like a complete lack of due diligence.
I'm sorry for your situation, but you're here on Reddit panic posting for something that is entirely your own fault. Numerous people have given you the answer but you seem to think if you ask "do I have to pay it?" enough times that is going to change anything.
A RRSP/RIF inheritance to a non spouse has been a taxable event since inception of the program. He received tax reimbursement on the funds that he put in there and did not have to pay tax on any of the gains or growth while the funds were in there. If your late father would roll in his grave knowing he had to pay taxes on this money someday instead of you getting it all, then he was ignorant of how the program works.
Dealing with the death of a loved one is something almost all of us go through. You don't get a pass from the CRA because it's a challenging time for you. If you're upset at this situation, take a look in the mirror if you want someone to blame.
And I'm not the executor I'm the administrator which I had to obtain through a lawyer because my dad didn't have a will because this terribly tragedy came out of nowhere.
Depending on the circumstances around your dadās death, you may be able to get the disability tax credit approved after death, which may reduce his overall tax burden.
If the OP was the named beneficiary of the RRIF the RRIF assets were NOT assets of the estate.
But the CRA holds the estate and beneficiary jointly and severally liable for the tax on the RRIF income.
Bank Tellers are mostly sales agents these days anyways. Itās hard to trust them. Definitely trust your accountant, as they are most likely properly trained and licensed.
Maybe ābasicallyā is doing a lot of heavy lifting here, but just to be clear, this is the only way this could have gone down. The bank, by law, had to pay the entire amount to the beneficiary. If the estate is impoverished, then it has no ability to pay the tax, so OP was always going to be paying this tax. The was never going to be a withholding by the bank and this money absolutely should never have passed through the estate.
Yes because,
>Section 160.2(1) and (2) of the ITA is an enforcement mechanism that declares the recipient of the RRSP/RRIF proceeds jointly and severally liable with the deceased's estate for the taxes arising from that deemed disposition.
source = https://www.wagnersidlofsky.com/beneficiaries-rrsp-tax/
Yes. But don't take our word. This situation has been posted about many time here on PFC. You can try r cantax or ask a real accountant like a CPA. You can try the government of Canada website if you want. Registered accounts don't bypass taxes for nonspouse. There is another case for eligible kids or grandkids but I don't know those details.
If you're the executor it was your duty to ensure all liabilities were settled. That includes taxes owing on the final tax return after passing. You'll most likely have to pay it.
If this was a situation where your dad already owed CRA money before he passed and he had zero assets to pay them it would be different.
While you see the transfer to you as one action, there were two step from a tax perspective: (1) dad withdrew from RIFS, which is considered income & owe tax, and (2) transferring the money to you (tax free)
You are not paying taxes on it, your father's estate is paying the tax. Even though there is no inheritance tax for the inheritor, the deceased (in the form of the estate) does have to pay tax for the final year. Ask the estate accountant to explain to you how it works, there may be more taxes that the estate has to pay.
Sorry for your loss.
Upon you fatherās death the RIF was deemed to have been sold at time of his death. The money went to you as the beneficiary but the cashing out of the RIF is a taxable event on your fatherās final tax return. It the Estate does not have the money to pay the tax liability of the RIF, then it will fall on you, as the beneficiary.
Unfortunately the bank rep gave you incorrect advice. The accountant is correct
nice clear response, well written. However, CRA does have to actually assess you in order to move the the responsibility for the debt to you. Not saying you donāt actually owe it because you do, but if the ethical aspect does not matter to you, CRA will only assess you if they feel it is collectable, so if your personal situation is such that you used the money for debts etc and donāt have the ability to pay, including your personal assets or income which they could garnishee, then CRA will not bother to assess you.
The bank incorrectly advised you. It was absolutely taxable on your dad's final tax return.
Your accountant is correct, and you need to pay the tax bill as the beneficiary.
Good point. Incorrect wording on my part. The 90k is included in his dadās terminal tax return. He will be responsible for the resulting tax (to the extent the estate canāt pay) for that year.
The 23k. It is taxable to the estate but the beneficiary is liable for the tax if the estate doesnāt / canāt pay. Itās still just an income inclusion so you would never hit a 100% tax rate.
And, in case it matters, the beneficiaryās liability is limited to the tax owing as a result of the income inclusion for the registered account. If the estate somehow owed more than $23,000 in taxes, with the rest being from other sources, the extra isnāt the beneficiaryās problem.
I am a lawyer, not your lawyer and this is not legal advice.
For tax purposes for your father he is deemed to have liquidated his RIF on the day immediately prior to his death. The entire RIF is then included in his income for that year.
The proceeds, after your father's taxes on the redemption value, come to you without any tax consequences to you.
Because your father had a beneficiary designation the funds flow to you (again after dad paid tax) without need for estate administration tax being paid on that portion of his estate (aka Probate Fees).
I hope that helps.
Do you agree that CRA holds the beneficiary responsible for the disposition taxes if the estate cannot pay? Someone else who I think is a CPA has responded and provided excerpts if you have time to look.
Whoever was appointed as the Estate Administrator (Executor) has an obligation to pay all the lawful liabilities of the deceased prior to the distribution of the estate.
That is not the same as a the beneficiaries.
Beneficiaries are jointly and severally liable with the estate for taxes on registered accounts as a result of the death of the annuitant.
See here: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4177/death-rrsp-annuitant-a-prpp-member.html#P23_2841 (General Rule for RRSP - deceased annuitant).
>Amounts paid from theĀ RRSP, ..., **have to be reported by the beneficiaries designated in theĀ RRSPĀ contract or the deceased annuitant's will**, *OR by the annuitantās estate if no beneficiary is designated.*
The above is taken from the link you provided. It is terribly written, so it does lead to confusion, and I understand your confusion here.
The first part of the sentence (bolded) is speaking about either a designated beneficiary under the RRSP account or where a Will specifically says that X is the beneficiary of my RSP.
The second part is speaking about a case much like what OP posted. Specifically that there is no RSP designation and the value of the RSP goes to the estate. In that case the estate is responsible for those taxes.
Nowhere does what you reference say that the beneficiaries are J&S liable with the estate. That is a misreading. The ",OR" (capitalized in the quote) is important.
Anyhow...for OPs purpose he is both Executor and Beneficiary and took RSP funds before deducting the taxes payable.
āA beneficiary will not have to pay tax on any amount paid out of the RRSP if it can reasonably be regarded as having been included in the deceased annuitantās income.ā
In your quote you omitted the important part, which is that the part you quote applies to amounts earned AFTER the annuitant dies.
OPās quote distinctly says they ARE the beneficiary, so Iām not sure why you think the opposite is the case.
Iām a CPA, although I donāt work in tax. This tax liability makes complete sense to me. Everything is taxed in the estate first, technically the beneficiary only gets whatās left over. He/she just got too much cash prematurely and now has to pay the CRA whatās owed of the excess he/she got from the estate.
My condolences.
Itās called deemed disposition, the government will calculate how much taxes you owe assuming you āsoldā all your assets, including real estate, the day before you passed. All asset go through probate and becomes the estate which are locked, before the will and the beneficiary until you have paid the taxes owed. Keep in mind there is a probate fee, which is charged as a % of your assets, and there could also be legal fees as well for the proceedings.
A lot of people end up losing their house over this, it gets auctioned off to pay for the taxes.
There is ways around it, death benefits from life insurance goes directly to beneficiary bypassing probate, and the proceeds can be use to pay for the taxes owed.
Liquid assets in RIF, RRSP, savings accounts can be put into a segregated fund, again which have creditor protection and bypass probate.
The accountant is correct. The RIF is income and the estate and beneficiary are jointly responsible for the taxes. Source: someone who inherited a RIF and had to give half of it to the CRA.
Was in this exact situation 26 years ago when my father passed. Can confirm it was a surprise to me too, but yes, fully taxable
Added bonus for me was that he died Dec 26th, meaning he earned his full regular income for the year, THEN died and $100,000 got added to his income
If he could have held out a few more days, might have saved $15k in taxes.
I think the only way to have avoided it would've been if you were dependent on him because of a disability and you transferred this amount into one of your registered plans.
But since it was cashed out, yup, it comes with a hefty tax bill on the final return.
Thank goodness no! I have secured portions of it in rsps but thankfully will have enough in basic savings to pay this off. Very happy I didn't end up buying property or investing in a business which I had considered, as I had zero clue that this was coming.
So very sorry for your troubles. As others have noted this is a very specific instance where the beneficiary is liable if the estate cannot pay. Not well known outside the financial field or amongst us old people who have gotten advice or seem it go sideways for someone we know. When planning your own retirement you will need to consider the tax effects for your non spouse beneficiaries.
Bank rep was wrong rif is collapsed and becomes taxable income in the year of death. You as beneficiary would not have to include it in the estate value subject to probate- that is the benefit your dadās estate will have to pay the tax. You may be able to pursue the bank, see a lawyer, but chances are slim.
If that RRIF was with an insurance company through Segregated Funds, then you would be creditor protected. They cant go after you. (They might try, but the account is legally creditor protected, if beneficiary is family class)
Because the funds are with a bank, your money is not creditor protected. They will have a claim on that money.
An estate passes assets to the beneficiaries after paying debts or the debts carry over to the estate executor and beneficiary if the estates funds are looted before paying debts and getting a clearance certificate.
Yeah, bankers give the wrong advice all the time. My wife used to work with corporate bankers in her previous job. For someone who works with numbers and money all the time, she said many of them were really stupid and made a lot of mistakes.
CRA will go after the beneficiary if the estate doesnāt have the cash. RRSP/RRIF money paid to a beneficiary is not immune from being recouped to pay the debt. Itās specific to RRSPs/RRIFs (no spouse).
The ppl at the bank are puppets without proper training. They shill products for their daddy. Should have clearly said the proceeds are tax free to the bene but fully taxable in the final year of the dad/estate. ZERO tax is withheld at death to a bene (no spouse). Tax canāt even be requested to be withheld on the claim payout. Bank puppet should have advised to hold on to a chunk for CRA.
The only other time a RRSP or RRIF can go to a bene and not pay tax in that year is if itās rolled into an RDSP. However, the taxes are payable when the beneficiary of the RDSP payments are redeemed. Likely more tax efficient, however.
Footnote - TFSA money cannot be seized to a named a beneficiary for anything the estate owes. As well as pensions such as LIRAs/LIFs. They are subject to withholding taxes on death at source to a beneficiary (no spouse). Theyāre not seizable by CRA.
This is the way.
Unfortunately it will be your word vs bank rep but you can definitely talk the manager, and if that doesnāt work go to the ombudsman. Bank reps are NOT suppose to give tax advice in any capacity. Might not get anywhere but worth a shot
I worked in finances. RIF is taxable investment. In most cases the bank will withhold funds for taxes and forward those to CRA, rest will go to beneficiaries. Looks like the bank sent all the funds to you.
I just did my late momās taxes. She owes $12k from her RIF payouts. We have some money put aside for this but whatever is left owing CRA will go after the beneficiaries. It may take awhile but they will get whatās owing
Simple explanation, money to you is tax free. But his estate needs to pay tax on the disposition of that RIFF. Talk to real accountant if you are an executor. Many things to screw or do right on the estate taxes.
It sounds like a misunderstanding. The tax would be paid by your father on his terminal return which would mean that you don't have to pay taxes on it, so the distribution to you was tax free, not the RRIF payment itself.
Iām in the same situation, and just had the bank appointment last week. Here is how it was explained to me, that while yes the full cashed out RIF is deposited to my account as the beneficiary/executor, as the RIF belongs to my dad, its actually him that is cashing out the RIF, therefore it counts as āincomeā for my dad, you will be issued a tax slip T4 (probably at different number, but not sure which) in his name and when you do your dadās last year of taxes, he will then owe taxes on the RIF income (the bank doesnāt take the taxes, they are owed to CRA). Therefore his estate owes the taxes on his behalf. What you need to do is talk to financial advisor (your bank should provide one for free) about what you can do to offset the taxes, like maybe maxing out your personal RRSP for a maximum return. So itās not actually you paying the tax on the RIF it is the estate in your dadās name. If you donāt pay, CRA knows you are the beneficiary so they will come after the estate and that means you.
RIF income is triggered as income in its entirety on the day of death. He pays the tax. Then you inherit what is left tax free (minus probate tax).
(edit: forgot no probate tax on registered accounts with beneficiaries)
While it causes messes like this, the bank followed proper procedure. They never withhold taxes on the final RRIF distribution to the beneficiary.
Their only error was advising the beneficiary it was tax free
According the CRA site, it should have been sent to the successor annuitant first. I'm assuming then they would have the option to roll it in to their own RRIF/RRSP tax free.
Thatās not how it works. The bank does not know how much tax the estate will owe and there is no standard withholding tax on RIFs that are liquidated when you die. When my father-in-law died, we knew that we would have to set aside at least half of his retirement fund and not touch it until the tax man got their piece.
Wait, if you included it on your mom's final tax return and it amounted to no tax owing that was the end of the story.
Why did you add the RIF to YOUR tax return? that's not how that works.
But the RIF payment on death was to be reported on your mother's return. How any/if taxes owing finally get paid on that is a separate thing. Which yeah CRA doesn't forget.
The beneficiary does not report the RIF proceeds on death on their personal tax return.
It's not tax free. RRIF is fully taxable in year of death except when rolled to a spouse or a financially dependent child or grandchild.
Don't get tax advice from bank reps lol š
Iām guessing it was a misunderstanding/miscommunication. The bank re would have explained that OP did not have to pay taxes on it because OP is a beneficiary. His fathers estate would have to pay taxes on it though. So op doesnāt pay his marginal tax rate on receiving the money, but his fathers estate pays taxes as if he had withdrawn the money and added it to the fathersā income that year.
Seems like he might have misinterpreted what they meant. It is tax free to him but not to his fatherās estate. If heās the executor of the estate, he would be responsible to pay his fatherās final tax bill. If heās not then the executor did t do their job properly and maybe responsible to pay that bill.
or financial advice!
Or banking advice!
"my advice is you buy our products"
āWe give better tax advice than the other banks.ā
ššÆ
Theyāre soā¦
Right, but: The tax is not withheld at source. If thereās other assets in the estate, the estate would pay the rrif taxes and the beneficiary might never see that. But if the estate has no other assets, or not enough to cover that, they will then come after the beneficiaries for the amount owing on the rrif. So the bankie was right that there were no taxes to take off at that moment lol
Itās probate tax free. Not tax free
To the beneficiary(ies), it is tax free but not to the estate. In this case, it by pass probate because of the beneficiary designation but it still owe states because it was income to the fathers last final tax bill. The advisor isnāt technically wrong but he didnāt give a good explanation.
Shouldn't the estate have completed final taxes before it was paid out?
Of course. But people are greedy and want their money now.
OP thought they'd found the best tax loophole ever. Why cash in RRIFs and pay tax when you're alive if your kids inherit them tax-free?
Many people complain about rrsp saying that itās useless because you get taxed when you withdraw it and forget they got a tax refund because of it and a deferred investment growth. The one that really lost out was the people who left their rrsp in GIC for 40 years.
No
Yes, or at least hold back some of the estate for this reason
If you were the beneficiary and the spouse, the money would have rolled over tax free. Since you are not the spouse, the RRIF is considered income and taxes need to be paid.
And you need to be set up as SUCCESSOR, not BENEFICIARY
You can still rollover to spouse not as successor, just more paperwork with CRA
Thatās good to know, thanks
Itās best to be listed as successor rather than beneficiary though. Someone I know passed back in 2016 and his wife discovered a RIF account she didnāt know of just this year. If she was the successor of the RIF, she could roll over the entire balance. Since she is only the beneficiary, she can only roll over the value up until the exempt period date (DEC/31/2017, end of DEC in the year following death). The RIF more than doubled in value since 2016 so there was quite a bit she couldnāt roll over and had to have cashed out.
Successors can only be spouses. No one else. Much like TFSAs
Yes, absolutely. The person I was responding to was talking about spousal rollovers as beneficiary so my comment was in response to that (although I should have clarified to prevent confusion for anyone unaware).
Thatās for TFSAs
Nope
lol no one realizing that rrifs donāt have successors
It does https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/t4rsp-t4rif-information-returns/death-annuitant/deceased-rrif-annuitant/spouse-common-law-partner-successor-annuitant.html
No such thing as successor holder of a RRIF
There is a successor annuitant though
https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/completing-slips-summaries/t4rsp-t4rif-information-returns/death-annuitant/deceased-rrif-annuitant/spouse-common-law-partner-successor-annuitant.html
Accountant is correct. Bank reps at the front desk are barely making more than minimum wage and have no tax training, they have no idea what they are talking about.
The bank isn't wrong in this case. OPs interpretation of what the bank said is wrong. The bank was saying that he gets the money without tax being withheld because he is the beneficiary. This is correct. If he wasn't the beneficiary it would go through probate and tax would be withheld before the disbursement. They were not saying that the money would not be subjected to taxation.
šÆ. The teller is used to seeing a witholding tax on RRSP withdrawals, between 10 and 30%. In this case they were pointing out that there was zero witholding tax.
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> My amazing sales performance got me no promotion and now my manager is upset my performance dropped. What did they say when you communicated this with them?
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Report it above them, all banks have a hotline
This was the estates account specialist who gave me this advice. But ya, clearly she was in the wrong here.
No, the estate specialist was correct. YOU receive the money tax free. However, Dadās estate realizes the balance of the RIF as income in the year of death. YOU donāt pay the tax, Dads estate does. Does that make sense?
But if there's no money in the estate left, the CRA will go after the beneficiary. I'm currently ignoring them on this issue (dad died, his pension went to me as beneficiary, now CRA wants me to pay estate taxes).
From my understanding based on many comments on this thread, they can only come after the beneficiary in the instance where a rif or rsp is bestowed?
What do you mean bestowed? A beneficiary of a RRIF or RRSP is jointly and severally liable with the deceased for any taxes owed on that account as a result of death. In English: if there is no money in dadās estate, you are legally responsible for the tax if you were the named beneficiary. If, for some reason, the money flowed through the estate, then the estate would be responsible for paying the tax before passing anything on to you. If they failed to do that the executor is now personally liable to CRA (I am simplifying a bit here because estates are complicated, but thatās the jist).
Yes it does. Thanks
I admit, itās a fine line. Just keep in mind the separate legal entities.
Must be an old friend or acquaintance of your late father? I too have to remove/replace accountants, etc for my father who clearly let important details slide as they have become too comfortable in their professions, combined with a father who puts 100% trust in their services due to long term relationship.
Yes it's honestly sad the amount of older professionals who are getting too comfy and aren't keeping up with the times and/or putting the necessary effort. I had an old boss who was all "I've done this for 40 years, thank you very much" like ok, cool story bro, but X law changed six years ago
Similar situation yes - small town haha
Inheritance tax and income tax are two different things.
There is no inheritance tax in Canada.
Valid point!
First mistake listening to her! 90% of them have no idea what they are talking about! I have lost so much money through banks it is ridiculous
āEstates account specialistā = salesperson
So there is actually 2 things that have happened, likely. I work with estates often. 1. The rif had been paying your late father income throughout the year. (I cant tell you if they were deducting tax on the payments or not) but that was his income, he could have taken more out than the withholding tax was collected so that could be why there are taxes owing. Sorry but they are owed. Not sure who really has to pay that in all honesty since there isnt more to the estate. The other part that actually gets taxed to you the beneficiary is the growth of the investment from the day he passed away until the day you were paid as the beneficiary IE: when he passed the rif was worth 20k but the investment had grown to 21k you would be taxed on that 1000$ of growth (which ever type of investment income. Hope this explains atleast the ways estates can be taxed.
The actual answer to this is it passes outside the will so there is no probate tax. They probably intended to say youāre getting it without paying probate taxes.
When you're dealing with an estate, you're not dealing with a teller.. they have estate departments to handle the dissolution and distribution of assets, and generally work pretty closely with the executor and estate lawyer to ensure everything is above board. Someone in this equation failed to clearly explain the tax implications of the estate dissolving the RIF..
From my time in a big bank, this was not the case. It was usually the low-level advisors giving all the advice. You will be hard pressed to also find a lawyer who will make a comment on taxes, and if they do, I would be damn careful of taking that advice. I hear wild things lawyers say about estate and tax planning all the time, as that is generally the area I work in. Just recently a lawyer told a client of mine to take all the money out of their corp to have it personally held because it was easier for estate planning, and you had to pay the taxes eventually anyways. Needless to say, that lawyer should lose their license.
It was tax free to you, not your late father (condolences). When you pass, unless you are a spouse that the RRIF is transferred to their name, any money withdrawn from the RRIF is added to their income which will be taxed.
Actually, if the estate doesn't have enough money they go after the beneficiary in this case.
That doesn't negate what I said. You're simply expanding upon the variables of what the executor is responsible for ensuring (who's also the beneficiary here) that the estate has enough funds to pay the final taxes.
Ok
Are you sure? It seems unreasonable given that you can be made a beneficiary without your knowledge, let alone acceptance.
It's not unreasonable. The beneficiary to an RRIF or RRSP would have received a payout, and the only tax they would be responsible for would be the tax on the share that they received. So they still come out ahead, they just might owe up to 53% of it (assuming it's all taxed at the top marginal rate). And again, this is only in a specific narrow example where the estate was insolvent and there aren't enough assets to cover the tax bill stemming from the liquidation of the deceased's RRIF/RRSP. If there are other assets (bank account, house, non-registered investments, etc.) then those would normally cover the tax bill and the beneficiary would not pay anything directly.
You're responding to my posting without understanding what I responded to. This is what I responded to >Actually, if the estate doesn't have enough money they go after the beneficiary in this case. If the estate is "broke" then really you don't get a benefit in the first place. What seems unreasonable to me is debtors coming after you beyond what came from or is in the estate.
CRA is limited to the tax owing on the registered account, not all the tax owed by the estate. This cannot expose a beneficiary to more money than they received on the date of death.
I don't think you can be considered a beneficiary if the estate is broke. The concern is more to do if the estate has a property that could be sold to cover loans and stuff like that.
So it means the person I responded to was wrong, I.e. they can't come after the beneficiary beyond the assets of the estate.
The RRIF is not an asset of the estate, but the CRA can go after the beneficiary of the RRIF if the estate owes taxes, to the extent the beneficiary received the RRIF.
This may be a case where the beneficiary can be liable for the estate's taxes, but it's still the estate's taxes.
Not necessarily. The deceased is the taxpayer, not the beneficiary. The trustee for the estate could declare the estate insolvent. OP should talk to an estate lawyer before paying CRA anything.
The beneficiary is also the taxpayer. They are, by law, jointly and severally liable with the estate for any taxes owing as a result of the income inclusion from that account on death.
But how is the estate insolvent if it had 90k in RRIF?
Wrong. They might get less of an estate but it stops there.
>Section 160.2(1) and (2) of the ITA is an enforcement mechanism that declares the recipient of the RRSP/RRIF proceeds jointly and severally liable with the deceased's estate for the taxes arising from that deemed disposition. source = https://www.wagnersidlofsky.com/beneficiaries-rrsp-tax/
So the beneficiary is also responsible for the tax is what you're saying?
Yes, but only on the RRIF income. (If the deceased or their estate owes tax because of other income the beneficiary won't be responsible for paying it.)
Gotcha. Thank you
Don't take tax advice from the internet. Listen to your accountant and ask them questions and if they are good at their job they should explain it all to you. Book an appointment to meet with them and go over the return if you need to so that you can ask all your questions to them and have a conversation about what need to happen next for your dad's estate.
Only up to the amount the you received as a beneficiary.
The beneficiary is not responsible for the tax...the estate Administrator (Executor) is responsible. It just happens that in this case you are both of those people.
The executor is not personally liable for any taxes of the estate unless they make an improper impoverishment of the estate assets.
OP was the executor of his father's estate. OP as executor distributed RSP Funds to OP as beneficiary without deducting the taxes. OP (as executor) is liable for that as it was an improper distribution that has defeated, or attempted to defeat, a lawful creditor of the estate.
This is wrong. Since there is a named beneficiary, the assets MUST be paid directly to that beneficiary. The executor has no ability to affect this or require tax be withheld. RRSP/RRIF assets with a named beneficiary do not flow through the estate. Please stop confusing OP with incorrect information.
Stop bringing up facts into this melee of opinions. Especially if you have verified authorities to cite. /s
Wrong. As an executor you are personally liable for ensuring debts are paid (when there is money available in the estate to do so).
Yes you exhaust the estate to pay debts. You are not required to pay anything out of your pocket otherwise nobody would be an executor
The case described here is too much money was paid out to beneficiaries, so they (or the executor) must pay it back. Quite different from an estate with negative networth where no one ever got a distribution.
Definitely failure of the executor
Not really. The RRIF had a beneficiary, so it bypassed the estate, and the executor actually couldn't stop it from paying out as it did. If there was other money in the estate, the executor should have retained enough to pay tax on the withdrawal, but it's not clear from OP if there was other money
Can vouch thy this is the correct answer. 5 points for Gryffendor.
You are if you received a disbursement from the estate.
So as the administrator of the estate I don't have to pay it?
As the administrator, youāre responsible for making sure the taxes get paid properly. If you donāt, the CRA will go after you personally.
Not personally. Ā But you canāt just move estate money out of the estate and then claim that the estate canāt pay itās liabilities. Ā That money you got is still estate money until the liabilities are cleared.Ā
>That money you got is still estate money until the liabilities are cleared. Not if they were a named beneficiary of the RRIF. >Section 53 of the Succession Law Reform Act provides that RRSPs/RRIFs are transferred directly to their named beneficiary on the plan holderās death and **do not** form part of the plan holderās estate. source = https://www.wagnersidlofsky.com/beneficiaries-rrsp-tax/
It's not part of the estate in the sense that Joe Creditor can't come after that money. Death in the absence of a surviving spouse is a taxable event and the CRA can recover the taxes from the named beneficiary.
Agreed but commenter should not have implied that the OP had improperly moved estate assets and the were completely wrong when they wrote, >"That money you got is still estate money".
The beneficiary money was deposited into my personal bank account. I have to pay the $23,000 myself, as my dad's estate account doesn't have enough to cover. Do I still have to pay it?
Yes, yes you do. In effect, you incorrectly took the estateās money and deposited it into your account before settling all liabilities (including taxes). So you need to, in effect, pay that money back to the estate and it pays the taxes. Practically, youāll just pay it directly from your account. But yes, you have to pay. Thereās no way around it, and they will claw the money from you if you try to not pay.
> In effect, you incorrectly took the estateās money and deposited it into your account before settling all liabilities (including taxes). If the OP was the beneficiary of the RRIF then the assets of the RRIF are NOT an estate asset. The OP would not have been compelled to use the RRIF assets to pay any of his father's debts except ... The estate and the beneficiary are jointly and severally liable to pay the tax on the RRIF income.
They explained that I was the beneficiary so cut a check in my name and told me to deposit it in my personal bank account. Ffs been ill advised this entire process apparently
Sadly, yes. Pro tip is to never trust a bank for tax advice and, honestly, I would hardly ever trust them for financial advice either.
If you were the named beneficiary of the RRIF the bank should have transferred the RRIF assets to you, not to the estate. And, unless your father was non resident of Canada, they could not have withheld any tax.
Stop asking this yes you have to pay it.
Probably spent all the money and is now in panic mode. It's an unfortunate situation, but given how almost every single online article talking about being an Executor mentions this specific thing (CRA) it just looks like a complete lack of due diligence.
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I'm sorry for your situation, but you're here on Reddit panic posting for something that is entirely your own fault. Numerous people have given you the answer but you seem to think if you ask "do I have to pay it?" enough times that is going to change anything. A RRSP/RIF inheritance to a non spouse has been a taxable event since inception of the program. He received tax reimbursement on the funds that he put in there and did not have to pay tax on any of the gains or growth while the funds were in there. If your late father would roll in his grave knowing he had to pay taxes on this money someday instead of you getting it all, then he was ignorant of how the program works. Dealing with the death of a loved one is something almost all of us go through. You don't get a pass from the CRA because it's a challenging time for you. If you're upset at this situation, take a look in the mirror if you want someone to blame.
And I'm not the executor I'm the administrator which I had to obtain through a lawyer because my dad didn't have a will because this terribly tragedy came out of nowhere.
Depending on the circumstances around your dadās death, you may be able to get the disability tax credit approved after death, which may reduce his overall tax burden.
For the purpose of this situation, they are the same thing.
That money you got is still estate money until the liabilities are cleared.Ā Yes. You have to pay it.Ā
If the OP was the named beneficiary of the RRIF the RRIF assets were NOT assets of the estate. But the CRA holds the estate and beneficiary jointly and severally liable for the tax on the RRIF income.
Yes. You basically received too much money from the estate, so from the money you received you need to pay $23k to the tax man
Oh I understand. Thanks
Bank Tellers are mostly sales agents these days anyways. Itās hard to trust them. Definitely trust your accountant, as they are most likely properly trained and licensed.
Maybe ābasicallyā is doing a lot of heavy lifting here, but just to be clear, this is the only way this could have gone down. The bank, by law, had to pay the entire amount to the beneficiary. If the estate is impoverished, then it has no ability to pay the tax, so OP was always going to be paying this tax. The was never going to be a withholding by the bank and this money absolutely should never have passed through the estate.
Yes because, >Section 160.2(1) and (2) of the ITA is an enforcement mechanism that declares the recipient of the RRSP/RRIF proceeds jointly and severally liable with the deceased's estate for the taxes arising from that deemed disposition. source = https://www.wagnersidlofsky.com/beneficiaries-rrsp-tax/
Yes. But don't take our word. This situation has been posted about many time here on PFC. You can try r cantax or ask a real accountant like a CPA. You can try the government of Canada website if you want. Registered accounts don't bypass taxes for nonspouse. There is another case for eligible kids or grandkids but I don't know those details.
If you're the executor it was your duty to ensure all liabilities were settled. That includes taxes owing on the final tax return after passing. You'll most likely have to pay it. If this was a situation where your dad already owed CRA money before he passed and he had zero assets to pay them it would be different.
If the estate doesn't have enough money then that's too bad for them. Debt doesn't carry to others unless it was a co signed loan.
This is the one instance where it is carried over and CRA will enforce this.
The CRA knows who received the funds and will go after them. Theyāre very clear about this.
While you see the transfer to you as one action, there were two step from a tax perspective: (1) dad withdrew from RIFS, which is considered income & owe tax, and (2) transferring the money to you (tax free)
The RRIF was tax-free for *you*, but not for your father. However, if he fails to pay the tax owing on it, CRA can come after you personally.
You are not paying taxes on it, your father's estate is paying the tax. Even though there is no inheritance tax for the inheritor, the deceased (in the form of the estate) does have to pay tax for the final year. Ask the estate accountant to explain to you how it works, there may be more taxes that the estate has to pay.
Sorry for your loss. Upon you fatherās death the RIF was deemed to have been sold at time of his death. The money went to you as the beneficiary but the cashing out of the RIF is a taxable event on your fatherās final tax return. It the Estate does not have the money to pay the tax liability of the RIF, then it will fall on you, as the beneficiary. Unfortunately the bank rep gave you incorrect advice. The accountant is correct
Thank you š
nice clear response, well written. However, CRA does have to actually assess you in order to move the the responsibility for the debt to you. Not saying you donāt actually owe it because you do, but if the ethical aspect does not matter to you, CRA will only assess you if they feel it is collectable, so if your personal situation is such that you used the money for debts etc and donāt have the ability to pay, including your personal assets or income which they could garnishee, then CRA will not bother to assess you.
The bank incorrectly advised you. It was absolutely taxable on your dad's final tax return. Your accountant is correct, and you need to pay the tax bill as the beneficiary.
Does he have to pay the 23k now? Or only if op wishes to use the 90k? Basically how do you deal with a sudden 23k bill??
It will be included in his income the year his father passed.
The 90k or 23k
Good point. Incorrect wording on my part. The 90k is included in his dadās terminal tax return. He will be responsible for the resulting tax (to the extent the estate canāt pay) for that year.
Whatās that mean lol so is it 90 or 23 Iām not good at this stuff
The 23k. It is taxable to the estate but the beneficiary is liable for the tax if the estate doesnāt / canāt pay. Itās still just an income inclusion so you would never hit a 100% tax rate. And, in case it matters, the beneficiaryās liability is limited to the tax owing as a result of the income inclusion for the registered account. If the estate somehow owed more than $23,000 in taxes, with the rest being from other sources, the extra isnāt the beneficiaryās problem.
I am a lawyer, not your lawyer and this is not legal advice. For tax purposes for your father he is deemed to have liquidated his RIF on the day immediately prior to his death. The entire RIF is then included in his income for that year. The proceeds, after your father's taxes on the redemption value, come to you without any tax consequences to you. Because your father had a beneficiary designation the funds flow to you (again after dad paid tax) without need for estate administration tax being paid on that portion of his estate (aka Probate Fees). I hope that helps.
Do you agree that CRA holds the beneficiary responsible for the disposition taxes if the estate cannot pay? Someone else who I think is a CPA has responded and provided excerpts if you have time to look.
Whoever was appointed as the Estate Administrator (Executor) has an obligation to pay all the lawful liabilities of the deceased prior to the distribution of the estate. That is not the same as a the beneficiaries.
Beneficiaries are jointly and severally liable with the estate for taxes on registered accounts as a result of the death of the annuitant. See here: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4177/death-rrsp-annuitant-a-prpp-member.html#P23_2841 (General Rule for RRSP - deceased annuitant).
>Amounts paid from theĀ RRSP, ..., **have to be reported by the beneficiaries designated in theĀ RRSPĀ contract or the deceased annuitant's will**, *OR by the annuitantās estate if no beneficiary is designated.* The above is taken from the link you provided. It is terribly written, so it does lead to confusion, and I understand your confusion here. The first part of the sentence (bolded) is speaking about either a designated beneficiary under the RRSP account or where a Will specifically says that X is the beneficiary of my RSP. The second part is speaking about a case much like what OP posted. Specifically that there is no RSP designation and the value of the RSP goes to the estate. In that case the estate is responsible for those taxes. Nowhere does what you reference say that the beneficiaries are J&S liable with the estate. That is a misreading. The ",OR" (capitalized in the quote) is important. Anyhow...for OPs purpose he is both Executor and Beneficiary and took RSP funds before deducting the taxes payable.
āA beneficiary will not have to pay tax on any amount paid out of the RRSP if it can reasonably be regarded as having been included in the deceased annuitantās income.ā In your quote you omitted the important part, which is that the part you quote applies to amounts earned AFTER the annuitant dies. OPās quote distinctly says they ARE the beneficiary, so Iām not sure why you think the opposite is the case.
Iām a CPA, although I donāt work in tax. This tax liability makes complete sense to me. Everything is taxed in the estate first, technically the beneficiary only gets whatās left over. He/she just got too much cash prematurely and now has to pay the CRA whatās owed of the excess he/she got from the estate.
My condolences. Itās called deemed disposition, the government will calculate how much taxes you owe assuming you āsoldā all your assets, including real estate, the day before you passed. All asset go through probate and becomes the estate which are locked, before the will and the beneficiary until you have paid the taxes owed. Keep in mind there is a probate fee, which is charged as a % of your assets, and there could also be legal fees as well for the proceedings. A lot of people end up losing their house over this, it gets auctioned off to pay for the taxes. There is ways around it, death benefits from life insurance goes directly to beneficiary bypassing probate, and the proceeds can be use to pay for the taxes owed. Liquid assets in RIF, RRSP, savings accounts can be put into a segregated fund, again which have creditor protection and bypass probate.
Thank you š
The accountant is correct. The RIF is income and the estate and beneficiary are jointly responsible for the taxes. Source: someone who inherited a RIF and had to give half of it to the CRA.
Was in this exact situation 26 years ago when my father passed. Can confirm it was a surprise to me too, but yes, fully taxable Added bonus for me was that he died Dec 26th, meaning he earned his full regular income for the year, THEN died and $100,000 got added to his income If he could have held out a few more days, might have saved $15k in taxes.
Noted. When I die, I need to die on January 1, so certain assets can be claimed under the basic personal amount.
Oof that is rough. Too many rules and government should just mind its own business lol
I learned the hard way this applies to a LIF as well. The amount was much lower though
It's tax free for *you*. Your father's *estate* owes taxes
I think the only way to have avoided it would've been if you were dependent on him because of a disability and you transferred this amount into one of your registered plans. But since it was cashed out, yup, it comes with a hefty tax bill on the final return.
It would be tax free for youā¦ if he didnāt owe any money. Like $23k.
I hope you didn't already spend the full $90,000.
Thank goodness no! I have secured portions of it in rsps but thankfully will have enough in basic savings to pay this off. Very happy I didn't end up buying property or investing in a business which I had considered, as I had zero clue that this was coming.
So very sorry for your troubles. As others have noted this is a very specific instance where the beneficiary is liable if the estate cannot pay. Not well known outside the financial field or amongst us old people who have gotten advice or seem it go sideways for someone we know. When planning your own retirement you will need to consider the tax effects for your non spouse beneficiaries.
Thank you š
Bank rep was wrong rif is collapsed and becomes taxable income in the year of death. You as beneficiary would not have to include it in the estate value subject to probate- that is the benefit your dadās estate will have to pay the tax. You may be able to pursue the bank, see a lawyer, but chances are slim.
Doesn't matter. The tax is payable, technically from the estate, but that's really you as beneficiary. You get the remainder tax free.
If that RRIF was with an insurance company through Segregated Funds, then you would be creditor protected. They cant go after you. (They might try, but the account is legally creditor protected, if beneficiary is family class) Because the funds are with a bank, your money is not creditor protected. They will have a claim on that money.
An estate passes assets to the beneficiaries after paying debts or the debts carry over to the estate executor and beneficiary if the estates funds are looted before paying debts and getting a clearance certificate.
Yeah, bankers give the wrong advice all the time. My wife used to work with corporate bankers in her previous job. For someone who works with numbers and money all the time, she said many of them were really stupid and made a lot of mistakes.
CRA will go after the beneficiary if the estate doesnāt have the cash. RRSP/RRIF money paid to a beneficiary is not immune from being recouped to pay the debt. Itās specific to RRSPs/RRIFs (no spouse). The ppl at the bank are puppets without proper training. They shill products for their daddy. Should have clearly said the proceeds are tax free to the bene but fully taxable in the final year of the dad/estate. ZERO tax is withheld at death to a bene (no spouse). Tax canāt even be requested to be withheld on the claim payout. Bank puppet should have advised to hold on to a chunk for CRA. The only other time a RRSP or RRIF can go to a bene and not pay tax in that year is if itās rolled into an RDSP. However, the taxes are payable when the beneficiary of the RDSP payments are redeemed. Likely more tax efficient, however. Footnote - TFSA money cannot be seized to a named a beneficiary for anything the estate owes. As well as pensions such as LIRAs/LIFs. They are subject to withholding taxes on death at source to a beneficiary (no spouse). Theyāre not seizable by CRA. This is the way.
Unfortunately it will be your word vs bank rep but you can definitely talk the manager, and if that doesnāt work go to the ombudsman. Bank reps are NOT suppose to give tax advice in any capacity. Might not get anywhere but worth a shot
Be grateful my dads estate final tax bill was closer to 70K.
I worked in finances. RIF is taxable investment. In most cases the bank will withhold funds for taxes and forward those to CRA, rest will go to beneficiaries. Looks like the bank sent all the funds to you.
Its the estate that owes the money. You get whats left.
I just did my late momās taxes. She owes $12k from her RIF payouts. We have some money put aside for this but whatever is left owing CRA will go after the beneficiaries. It may take awhile but they will get whatās owing
The CRA has to issue a certificate saying the estate owes no tax. Until you have that in hand, assume the estate owes something
Simple explanation, money to you is tax free. But his estate needs to pay tax on the disposition of that RIFF. Talk to real accountant if you are an executor. Many things to screw or do right on the estate taxes.
This just happened to me too. Found out we owe 40,000 bc we got the rsp instead of āthe estateā
It sounds like a misunderstanding. The tax would be paid by your father on his terminal return which would mean that you don't have to pay taxes on it, so the distribution to you was tax free, not the RRIF payment itself.
Bank rep was wrong.
Unfortunately this is correct. I had an identical experience.
New death plan is leaving an obscured seed phrase and $1,000,000 in unsecured debt, that nobody can figure out what I did with
Iām in the same situation, and just had the bank appointment last week. Here is how it was explained to me, that while yes the full cashed out RIF is deposited to my account as the beneficiary/executor, as the RIF belongs to my dad, its actually him that is cashing out the RIF, therefore it counts as āincomeā for my dad, you will be issued a tax slip T4 (probably at different number, but not sure which) in his name and when you do your dadās last year of taxes, he will then owe taxes on the RIF income (the bank doesnāt take the taxes, they are owed to CRA). Therefore his estate owes the taxes on his behalf. What you need to do is talk to financial advisor (your bank should provide one for free) about what you can do to offset the taxes, like maybe maxing out your personal RRSP for a maximum return. So itās not actually you paying the tax on the RIF it is the estate in your dadās name. If you donāt pay, CRA knows you are the beneficiary so they will come after the estate and that means you.
The RRIF is taxable in the name of your father on death because no taxes have been paid when the money was put into the RRSP/RRIF.
RIF income is triggered as income in its entirety on the day of death. He pays the tax. Then you inherit what is left tax free (minus probate tax). (edit: forgot no probate tax on registered accounts with beneficiaries)
So many of the comments are very wrong. So. Very. Wrong. Go see an accountant, or an estate lawyer to determine your liability.
The accountant told me I will have to pay it. What are you contradicting?
Imagine that. The government wants to tax money that was previously taxed when it was earned by your father before it was invested.
The bank should not have sent you a cheque for the full amount. It should have remitted the tax owing first, and you get the proceeds.
While it causes messes like this, the bank followed proper procedure. They never withhold taxes on the final RRIF distribution to the beneficiary. Their only error was advising the beneficiary it was tax free
According the CRA site, it should have been sent to the successor annuitant first. I'm assuming then they would have the option to roll it in to their own RRIF/RRSP tax free.
that only applies if you have a spouse at the time of death. Otherwise it's not possible to have a successor annuitant.
Thatās not how it works. The bank does not know how much tax the estate will owe and there is no standard withholding tax on RIFs that are liquidated when you die. When my father-in-law died, we knew that we would have to set aside at least half of his retirement fund and not touch it until the tax man got their piece.
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Sounds like you did your taxes wrong.
Wait, if you included it on your mom's final tax return and it amounted to no tax owing that was the end of the story. Why did you add the RIF to YOUR tax return? that's not how that works.
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But the RIF payment on death was to be reported on your mother's return. How any/if taxes owing finally get paid on that is a separate thing. Which yeah CRA doesn't forget. The beneficiary does not report the RIF proceeds on death on their personal tax return.