The last annuitant of a trusteed registered retirement income fund (“RRIF”) died in 2018, and that annuitant’s spouse, who was the sole designated beneficiary under the RRIF, died before the distribution of RRIF proceeds, which was made to the spouse’s estate in 2020.
Pursuant to s. 146.3(6), the FMV of all the RRIF property held at the time of the annuitant’s death was included in the income of the annuitant in the year of death.
Although the amount of this income inclusion would have been reduced under s. 146.3(6.1)(b) had it been paid to a qualifying survivor as a designated benefit, such reduction can only occur if it had been paid to the deceased annuitant’s estate, and the deceased annuitant’s legal representative and a qualifying survivor jointly elected to treat some or all of it as being paid to the qualifying survivor as a designated benefit. However, here, there was no qualifying survivor, as the spouse predeceased the annuitant.
Given that the RRIF continued to be exempt from tax until the end of the year following the death (i.e., until the end of 2019), and the trust could take a deduction in 2020 for gain and income distributed by it, appreciation in the RRIF property between the date of the annuitant’s death and the distribution date was to be included in the income of the spouse’s estate for 2020.