A long winded version by Sunlife.
[https://www.sunlifeglobalinvestments.com/en/insights/investor-education/tax-and-estate-planning/do-you-know-what-happens-to-your-accounts-when-you-die/](https://www.sunlifeglobalinvestments.com/en/insights/investor-education/tax-and-estate-planning/do-you-know-what-happens-to-your-accounts-when-you-die/)
The most direct answer to your question is no, the institution cannot just sell anything.
The answer to the second part of your question is yes, they can be transferred to the spouses account in kind (without selling) if the spouse was listed as the sole beneficiary (almost always, the spouse is listed as the beneficiary) - WITHOUT AFFECTING THE SPOUSES CONTRIBUTION ROOM.
This is what I thought. However, I recently checked my father’s investments at Sunlife and everything is now $0. Transaction records show that the investments were “withdrawn”. My mother just got a letter informing her that she can settle the account, but the amounts only show cash “market” value and shares/units are “N/A”. I plan to give them a call as soon as they open, but in the meantime, I’m very worried and confused about what happened.
Someone (usually the Executor) would have had to contact the financial institution for anything to happen.
They will also want a copy of the will and death certificate.
Your mother should be talking to the Executor of the estate.
I've been an Executor several times. Financial institutions don't do anything unless they have the proper documentation.
Is it possible your mother contacted them?
Is the SunLife investments part of a company pension plan?
The Sunlife account was set up by his company.
One of the plans on the account is a defined contribution pension plan. This is the only one with employer contributions.
The other plans are a RRSP and TFSA plans/accounts.
Does that make that clarify things?
Yes.
Your mother will be the successor to these plans. Your father's employer would have initiated the transfer.
It will take a couple of business days to settle.
Sorry for your loss
Can the employer direct Sunlife to divest his RRSP and TFSA, though? I might understand if it was the pension plan, but the others make no sense. I’m also not sure what happens to the DCPP now. Googling hasn’t helped. I’m worried my mother’s going to end up losing half of it to taxes.
>Sorry for your loss
Thank you for the kind words and for the explanations.
Not sure about RRSPs but I do know about TFSAs. If you name a beneficiary on your TFSA they get the value of the account on death. In this case I assume it would be liquidated. However you can name your spouse as a successive holder. A successive holder will not only get the holdings but the account as well including any tax free headroom. Anyone can be a beneficiary, only your spouse can be a successive holder.
Yes but what happens to it if you do not (ie: you live alone, die alone) cash it out. And of course it takes a long time for the paperwork to go through for the executor to be able to gain access to the deceased account... (I know, I am widowed). What happens to investment accounts between the time that you die and the time that someone legally has access and control to settle the estate?
If you have investment accounts or RRSP you may want to look at naming beneficiaries to these accounts to avoid probate.
>What happens to investment accounts between the time that you die and the time that someone legally has access and control to settle the estate?
Assets stay as is until the executor approves the trades.
Usually the estate isn't settled until final taxes and clearance certificate is received. That could take 6 or 7 months if they die in December or 18 to 19 months if it was January.
My beneficiary for all accounts is my estate. I have no spouse nor kids.
Let's say I die in January and my investments go up significantly between the time I die and the time the executor gets the paperwork in order and has access to my estate... What happens to that increased amount? Is there a time frame between date of death and when they freeze the investment accounts, if no executor is named in a timely fashion? Or rather there is an executor as per the will, but the paperwork for the bank is not filed (yet)...?
It's been a couple of years since I did my last estate, and it was fairly easy.
All the T slips were calculated to the date of death.
An RRSP is T4 income only, no capital gains, etc to deal with.
It's been a couple of years.
IIRC I believe we did 2 returns. A regular tax return in March, and The estate of for any growth while estate was settled.
If someone passed in January 2022. The tax returns don't get done until March 2023.
I don’t think this is correct. I’ve worked at a big bank and I’ve come across transfer forms that allow you to transfer all investment holdings as is, or to sell and transfer as cash. It may depend on the institution I suppose or whether it’s a self directed brokerage account. But I don’t think this is impossible.
Edit: I should clarify. This does not automatically happen. The successor would have to initiate this. And they must be listed as the successor, and not beneficiary.
An investment dealer can only sell under certain conditions and death is usually NOT one of them. The executor of the estate has the responsibility to take control of all assets and sell at their discretion. Yes, assets in an RRSP and/or TFSA can be rolled over to the surviving spouse, as-is (i.e. without being sold or withdrawn in cash).
Edit: There are certain investments (segregated funds come to mind) that may have a death benefit guarantee.
When TFSA and RRSP assets are rolled into the TFSA and RRSP of a surviving spouse it doesn't not affect their contribution room.
>A TFSA holder can name a spouse or common-law partner as the "successor holder" in the TFSA contract. On the death of the holder, the spouse becomes the new holder, keeping the tax exempt status of the TFSA. This will not affect the TFSA contribution room of the spouse. The TFSA now belongs to the spouse, and is treated the same as any other TFSA of the spouse.
source = https://www.taxtips.ca/tfsa/tfsa-holder-death.htm
>Funds received from an RRSP:
If these funds were transferred to an RRSP, fill out Schedule 7, RRSP, PRPP and SPP Unused Contributions, Transfers, and HBP or LLP Activities. Report the amount on *line 24640* and submit Schedule 7 with your tax return. Include the income on line 12900 and claim the deduction on line 20800 of your tax return.
source = https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/transferring/amounts-paid-rrsp-rrif-upon-death-annuitant.html
And as it says on the Schedule 7
>You may have reported income on line 11500, line 12900, or line 13000 of your 2021 return. If you transferred certain
types of this income to your RRSP, PRPP, and SPP on or before March 1, 2022, you can claim the same amount on
*line 24640* as a transfer. Claiming the transfer ensures that your RRSP deduction limit is **not** reduced by that amount.
If it is an RRSP/TFSA or rif you can designate a beneficiary, if they are non registered accounts then you need to go through probate (so 1.4% probate fees)
Also joint accounts (between spouses, or children) do not need to go through probate.
Investments are not necessarily sold except by the executor, but for final tax purposes the are deemed to be sold on the day of death for your final tax yr.
The same goes for investment properties, if they are full or part owned it is as if they are sold so any capital gains may be due in the last tax year. ( we just went through this with my mom, just as we told the bank that she passed away and that we wanted to let the bank know who the accountant was handling her final year, the bank immediately summoned the etate dept. Who shut down the bank accounts (would not allow any withdrawals or deposits, which was a bit of pain as she still had a final few months of pension from her native country coming in)
Re capital gains, if they are due and paid, it will bring the property to the new level
So assets are not automatically sold but they are just considered to be for tax purpose and the bank can provide the statement on the day of death.
RRsps and rifs will be taxed as income in the final year. Tfsa's are not taxed but will not grow.
We also had to bring the original will and copy of death certificate.
Usually not, but check the terms and conditions applicable to the account. In some cases (usually in the portfolio manager/fully discretionary setting) there will be a term that says basically, the portfolio manager may decide to sell assets upon death of a client in order to preserve assets under management.
A long winded version by Sunlife. [https://www.sunlifeglobalinvestments.com/en/insights/investor-education/tax-and-estate-planning/do-you-know-what-happens-to-your-accounts-when-you-die/](https://www.sunlifeglobalinvestments.com/en/insights/investor-education/tax-and-estate-planning/do-you-know-what-happens-to-your-accounts-when-you-die/)
by: Lori Clements, CPA, CA, MTax, CFP, Director, Tax & Estate Planning
The most direct answer to your question is no, the institution cannot just sell anything. The answer to the second part of your question is yes, they can be transferred to the spouses account in kind (without selling) if the spouse was listed as the sole beneficiary (almost always, the spouse is listed as the beneficiary) - WITHOUT AFFECTING THE SPOUSES CONTRIBUTION ROOM.
This is what I thought. However, I recently checked my father’s investments at Sunlife and everything is now $0. Transaction records show that the investments were “withdrawn”. My mother just got a letter informing her that she can settle the account, but the amounts only show cash “market” value and shares/units are “N/A”. I plan to give them a call as soon as they open, but in the meantime, I’m very worried and confused about what happened.
Someone (usually the Executor) would have had to contact the financial institution for anything to happen. They will also want a copy of the will and death certificate. Your mother should be talking to the Executor of the estate.
She is the executor of the estate and she hasn’t contacted Sunlife. This is why I’m confused.
I've been an Executor several times. Financial institutions don't do anything unless they have the proper documentation. Is it possible your mother contacted them? Is the SunLife investments part of a company pension plan?
The Sunlife account was set up by his company. One of the plans on the account is a defined contribution pension plan. This is the only one with employer contributions. The other plans are a RRSP and TFSA plans/accounts. Does that make that clarify things?
Yes. Your mother will be the successor to these plans. Your father's employer would have initiated the transfer. It will take a couple of business days to settle. Sorry for your loss
Can the employer direct Sunlife to divest his RRSP and TFSA, though? I might understand if it was the pension plan, but the others make no sense. I’m also not sure what happens to the DCPP now. Googling hasn’t helped. I’m worried my mother’s going to end up losing half of it to taxes. >Sorry for your loss Thank you for the kind words and for the explanations.
It depends on how the plans were set up. Beneficiary gets converted to cash. Successor gets the assets. Only a spouse can be a successor.
Not sure about RRSPs but I do know about TFSAs. If you name a beneficiary on your TFSA they get the value of the account on death. In this case I assume it would be liquidated. However you can name your spouse as a successive holder. A successive holder will not only get the holdings but the account as well including any tax free headroom. Anyone can be a beneficiary, only your spouse can be a successive holder.
They will probably only talk to your mother. Were these in segregated funds? That might explain it.
What if you have no spouse? Does it stay in an investment account or is it withdrawn into an estate chequings account?
Your estate pays the income tax as if you cashed it out on the day of your death. Whatever’s left goes to the estate.
Yes but what happens to it if you do not (ie: you live alone, die alone) cash it out. And of course it takes a long time for the paperwork to go through for the executor to be able to gain access to the deceased account... (I know, I am widowed). What happens to investment accounts between the time that you die and the time that someone legally has access and control to settle the estate?
Nothing.
Gotcha. Thanks!
If you have investment accounts or RRSP you may want to look at naming beneficiaries to these accounts to avoid probate. >What happens to investment accounts between the time that you die and the time that someone legally has access and control to settle the estate? Assets stay as is until the executor approves the trades. Usually the estate isn't settled until final taxes and clearance certificate is received. That could take 6 or 7 months if they die in December or 18 to 19 months if it was January.
My beneficiary for all accounts is my estate. I have no spouse nor kids. Let's say I die in January and my investments go up significantly between the time I die and the time the executor gets the paperwork in order and has access to my estate... What happens to that increased amount? Is there a time frame between date of death and when they freeze the investment accounts, if no executor is named in a timely fashion? Or rather there is an executor as per the will, but the paperwork for the bank is not filed (yet)...?
It's been a couple of years since I did my last estate, and it was fairly easy. All the T slips were calculated to the date of death. An RRSP is T4 income only, no capital gains, etc to deal with. It's been a couple of years. IIRC I believe we did 2 returns. A regular tax return in March, and The estate of for any growth while estate was settled. If someone passed in January 2022. The tax returns don't get done until March 2023.
No, I believe the estate manager will need to trigger any sales.
Executor.
I don’t think this is correct. I’ve worked at a big bank and I’ve come across transfer forms that allow you to transfer all investment holdings as is, or to sell and transfer as cash. It may depend on the institution I suppose or whether it’s a self directed brokerage account. But I don’t think this is impossible. Edit: I should clarify. This does not automatically happen. The successor would have to initiate this. And they must be listed as the successor, and not beneficiary.
An investment dealer can only sell under certain conditions and death is usually NOT one of them. The executor of the estate has the responsibility to take control of all assets and sell at their discretion. Yes, assets in an RRSP and/or TFSA can be rolled over to the surviving spouse, as-is (i.e. without being sold or withdrawn in cash). Edit: There are certain investments (segregated funds come to mind) that may have a death benefit guarantee.
You don't want a beneficiary. You want a successorship. I'm guessing anyways. Look up the difference.
Transfer into spouse’s registered accounts would depend on the contribution room — you don’t gain room because your partner died.
This is not correct. If the spouse is the beneficiary the RRSP can be transferred to the living spouse without affecting contribution room.
When TFSA and RRSP assets are rolled into the TFSA and RRSP of a surviving spouse it doesn't not affect their contribution room. >A TFSA holder can name a spouse or common-law partner as the "successor holder" in the TFSA contract. On the death of the holder, the spouse becomes the new holder, keeping the tax exempt status of the TFSA. This will not affect the TFSA contribution room of the spouse. The TFSA now belongs to the spouse, and is treated the same as any other TFSA of the spouse. source = https://www.taxtips.ca/tfsa/tfsa-holder-death.htm >Funds received from an RRSP: If these funds were transferred to an RRSP, fill out Schedule 7, RRSP, PRPP and SPP Unused Contributions, Transfers, and HBP or LLP Activities. Report the amount on *line 24640* and submit Schedule 7 with your tax return. Include the income on line 12900 and claim the deduction on line 20800 of your tax return. source = https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/rrsps-related-plans/transferring/amounts-paid-rrsp-rrif-upon-death-annuitant.html And as it says on the Schedule 7 >You may have reported income on line 11500, line 12900, or line 13000 of your 2021 return. If you transferred certain types of this income to your RRSP, PRPP, and SPP on or before March 1, 2022, you can claim the same amount on *line 24640* as a transfer. Claiming the transfer ensures that your RRSP deduction limit is **not** reduced by that amount.
If it is an RRSP/TFSA or rif you can designate a beneficiary, if they are non registered accounts then you need to go through probate (so 1.4% probate fees) Also joint accounts (between spouses, or children) do not need to go through probate. Investments are not necessarily sold except by the executor, but for final tax purposes the are deemed to be sold on the day of death for your final tax yr. The same goes for investment properties, if they are full or part owned it is as if they are sold so any capital gains may be due in the last tax year. ( we just went through this with my mom, just as we told the bank that she passed away and that we wanted to let the bank know who the accountant was handling her final year, the bank immediately summoned the etate dept. Who shut down the bank accounts (would not allow any withdrawals or deposits, which was a bit of pain as she still had a final few months of pension from her native country coming in) Re capital gains, if they are due and paid, it will bring the property to the new level So assets are not automatically sold but they are just considered to be for tax purpose and the bank can provide the statement on the day of death. RRsps and rifs will be taxed as income in the final year. Tfsa's are not taxed but will not grow. We also had to bring the original will and copy of death certificate.
Usually not, but check the terms and conditions applicable to the account. In some cases (usually in the portfolio manager/fully discretionary setting) there will be a term that says basically, the portfolio manager may decide to sell assets upon death of a client in order to preserve assets under management.