7-912771
Dear Sir:
This is further to your letter of July 29, 1991, to Otto Jelinek, Minister of National Revenue, and to your subsequent conversations with Ms Joanne Bessette of the Department, concerning the treatment of interest earned on depositary registered retirement savings plans (RRSPs) after the death of the annuitant.
Retirement savings plans are defined in paragraph 146(1)(j) of the Income Tax Act (the "Act") and clause 146(1)(j)(II)(C) therein describes what is referred to as a depositary plan. Basically, it is an account with a bank or other financial institution which is to be used to provide a retirement income at maturity. It differs from an insured plan, which is a contract with an insurance company, and a trusteed plan, which is a trust and is a separate person for income tax purposes. In a depositary plan the owner of the account is the annuitant under the RRSP.
Normally the interest received or credited to such an account would be included in the annuitant's income pursuant to paragraph 12(1)(c) of the Act, however, subsection 146(20) deems the annuitant not to have received such interest. On death, the account becomes property of the estate or a beneficiary and the income earned after the date of death would not be that of the deceased annuitant but rather of the new owner of the property. Consequently, such interest would not be exempted from income pursuant to 146(20) of the Act. Prior to maturity, an RRSP has only one annuitant and even though a survivor spouse may be able to transfer amounts received from a deceased spouse's RRSP to his or her own RRSP, the survivor spouse is not an annuitant under the deceased spouse's plan.
We trust this explanation is satisfactory, however, should you have any further questions please do not hesitate to contact David Duff of the Rulings Directorate at 957-8953.
Yours truly,
for Director,Financial Industries DivisionRulings Directorate