Where the death of an annuitant under an RRIF is followed very shortly by the death of the surviving spouse, CRA accepts that the (briefly) surviving spouse will qualify as an annuitant under the RRIF provided that the predeceased spouse had so designated the survivor by will or in the RRIF contract – even if the surviving spouse did not receive any annuity payments before his or her death. This means that the deemed inclusion of the fair market value of the fund property will be in the hands of the second-to-die of the two spouses – except to the extent that there then is a transfer out of the fund to a financially dependent child or other eligible beneficiary (in which case, the eligible amount of the transfer is included in the transferee’s income under s. 146.3(5)(a).
In particular after defining the surviving spouse of the annuitant or a financially dependent child or grandchild (as defined in the s. 146(1) – “refund of premiums” definition) as an “Eligible Recipient,” and describing the two types of “designated benefits” in s. 146.3(1), CRA stated (TaxInterpretations translation):
the amount that is included in computing the deceased’s income, under subsection 146.3(5) and paragraph 56(1)(t), will be equal to the FMV of the RRIF property upon the death of the annuitant minus the amount determined under subsection 146.3(6.2). However, the amount of this reduction will be a benefit to be included in computing the income of the Eligible Recipient.
… In summary, subsection 146.3(6.2) allows for the determination of what portion of the designated benefit will be included in computing the deceased annuitant's income and what portion will be included in computing the income of the Eligible Recipient.