A couple separated in 2010 without proceeding to an official division of their assets. When Monsieur subsequently died, his will excluded Madame. She made a claim against the executor, and they then agreed in writing to transfer the property in the deceased’s RRIF to her for contribution to her RRIF. Can the amounts be transferred to her RRIF as “designated benefits” (as defined in s. 146.3(1),) with there being a resulting income inclusion and contribution exclusion to her? CRA responded:
[A]mounts paid out of the RRIF to the legal representative of the deceased annuitant, which the legal representative would like to transfer to the surviving spouse in settlement of her rights in the family patrimony, could qualify as a designated benefit, provided that these amounts are designated jointly by the legal representative and the surviving spouse on Form T1090 filed with the Minister … .
By virtue of subsection 146.3(6.1), where an amount qualifies as [such] a designated benefit… a designated benefit is deemed to be received by the surviving spouse, and not by any other person, out of or under the RRIF at the time it is received by the legal representative.
Thus, an amount that qualifies as a designated benefit can reduce the deemed benefit received by the last deceased annuitant under subsection 146.3(6)… [and] will be included in computing the surviving spouse's income in accordance with subsection 146.3(5)… .
However, where the conditions of paragraph 60(l) are met, the designated benefit included in computing the surviving spouse's income pursuant to subsection 146.3(5) and paragraph 56(1)(t) can be deducted from his or her income. …
[T]he transfer of the designated benefit to the surviving spouse could possibly be tax-free, provided that the surviving spouse pays an amount equal to the eligible amount [defined in s. 146.3(6.11)] as a premium under an RRSP, or a PRPP contribution, to acquire a qualifying annuity that meets certain conditions, or in consideration for an RRIF, as the case may be, within the time period provided in paragraph 60(l).