On the death of Mr. A, his Will provided a particular legacy of his RRIF to his surviving spouse (Mrs. B), who died half a year later before his estate was administered. 2015-0592681E5 indicates that, in order for an amount to qualify as a "refund of premiums" as defined in s. 146(1) (used in the "designated benefit" definition in s. 146.3(1)), the eligible recipient ("Eligible Recipient") described in that definition must be alive at the time of the joint designation of the amount as a designated benefit.
(a) Is Mrs. B considered to have received a designated benefit by virtue of her being alive at the time of the formation of the estate on the death of Mr. A?
(b) Do the amounts of the particular legacy paid to the legal representative of Mrs B’s estate qualify as “designated benefits” under para. (b) of the definition in s. 146.3(1)?
(c) Can the estate of Mrs. B receive the RRIF amounts payable to Mrs. B notwithstanding her death and pay the tax on those amounts?
CRA confirmed that the premature death of Mrs. A precluded access to the designated benefit rules, stating:
The mere fact that Mrs. B was the surviving spouse of Mr. A at the time of his death is not sufficient to cause Mrs. B to be deemed, pursuant to subsection 146.3(6.1), to have received a designated benefit at the time the deceased annuitant's legal representative receives amounts from Mr. A's RRIF. …
Subsection 146.3(6.1) [as well as para. (a) of “designated benefit”] has no application in this case since the legal representative receives nothing under the RRIF of the deceased last annuitant. …
[S]ince Mrs. B died before amounts were paid under the RRIF to the legal representative of the deceased last annuitant … the conditions of paragraph (a) cannot be met.
CRA went on to add, respecting para. (b) of the “designated benefit” definition:
Where … an amount from the RRIF of the deceased last annuitant is paid to the estate of the deceased and an Eligible Recipient is a beneficiary of the estate (as legatee or heir), the amount is not paid to the Eligible Recipient "out of or under the fund" and this situation does not comply with paragraph (b)… .
Accordingly, the amount deemed to be received by Mr. A pursuant to subsection 146.3(6) ...would be equal to the FMV of the RRIF property at the time of death, with no deduction available to reduce this amount.
The amounts included in the computation of Mr. A's income that were subsequently paid under Mr. A's RRIF to his legal representative would not constitute taxable benefits to the estate of Mr. A, by virtue of paragraph 146.3(5)(a).