2020-0867001E5 took the position that for an amount to qualify as a "designated benefit" as defined in s. 146.3(1), the eligible survivor must be alive at the time the benefit is paid or the joint election is made. There is nothing in the "designated benefit" definition or in the definition of "refund of premiums" in s. 146(1) indicating that the spouse or common-law partner ("Spouse") must be alive at the time of receipt of the benefit and there is no rule similar to the requirement for indefeasible vesting (as for s. 70(6)) for transfers from registered plans following death.
When asked to explain its position, CRA first noted that the s. 146.3(6.2) calculation could reduce the amount that the deceased was deemed to have received immediately before death pursuant to s. 146.3(6) (and instead include that amount in the income of the recipient) based on an amount qualifying as a designated benefit being paid. CRA then indicated that an amount paid out of the deceased’s RRIF to the legal representative of the deceased Spouse could not qualify under either para. (a) or (b) of the “designated benefit” definition.
- Regarding para. (a), the joint designation referred to therein was required to “be made jointly by the deceased annuitant's legal representative and the Spouse” so that “in order for the designation to be valid, the Spouse must be alive at the time the joint designation is made,” and so that a “joint designation made … [with] the deceased Spouse's legal representative would not satisfy this requirement.”
- In order for para. (b) to be satisfied “the amounts must be paid directly to the Spouse” and not to the Spouse’s estate.
In sum, the Spouse must be alive at the time the amounts are paid to the Spouse or, if applicable, at the time the joint designation is made.