The deceased died with an RRSP valued at $250,000. Later in the year, when the RRSP had appreciated to $255,000, the property in the RRSP was transferred to an estate account. The executor paid $205,000 (including $5,000 respecting the appreciation in the RRSP) to the surviving spouse (Ms. Y), who contributed that amount to her RRSP. That amount was designated by the executor and Ms. Y on Form T2019 as a refund of premiums, so that the deceased Mr. X had a $50,000 inclusion in his terminal return.
CRA essentially accepted this treatment of the $5,000 of income, so that it could be eligible for treatment under the refund of premiums and s. 146(8.1) designation rules, and be rolled over into Ms. Y’s return. In indicating that similar rules applied to RRIFs, CRA stated:
Where a legal representative of the deceased last annuitant of a RRIF receives a designated benefit, subsection 146.3(6.1) provides that the designated benefit is deemed to be received by the individual out of or under the fund at the time it is received by the legal representative and not to be received out of or under the fund by any other person.
Paragraph (a) of the definition "designated benefit" in subsection 146.3(1) provides that amounts paid out of or under a RRIF after the death of the last annuitant to the legal representative of that annuitant may be jointly designated on a Form T1090 filed with the Minister by the legal representative and the individual where the amounts paid were a "refund of premiums" as defined in subsection 146(1) and they were paid to the individual out of or under the RRIF and if the RRIF had not matured before the death.
Consequently, the amount that is jointly designated as a designated benefit should be reported by the individual on the individual’s income tax return in the year the payment was received by the legal representative, pursuant to subsection 146.3(5) and (6.1) and paragraph 56(1)(t).
In a situation where, at the time of filing the T3 estate return, an election under the definition of "designated benefit" in subsection 146.3(1) has been made, the increase in the FMV of the RRIF property determined after the date of death that is a designated benefit would not have to be reported in the T3 estate return.