TFSAs, RRSPs and RRIFs in an Ontario Estate: Beneficiary or Estate
A registered account with a valid beneficiary designation passes directly to that person and is excluded from the Estate Administration Tax calculation. An account with no designation falls into the estate, is distributed under the will, and is included in the tax. The complication that catches Ontario estate trustees is that these two things come apart: with an RRSP or RRIF, the money goes to the named beneficiary while the income inclusion lands on the deceased's final return. The estate is assessed, and residuary beneficiaries can watch their shares consumed by tax on an account they never saw. That is not the end of the analysis, because section 160.2 of the Income Tax Act makes the person who received the plan jointly and severally liable with the deceased for the tax attributable to it.
How Do the Three Accounts Differ on Death?
| TFSA | RRSP | RRIF | |
|---|---|---|---|
| Spousal designation available | Successor holder | Beneficiary, with rollover | Successor annuitant |
| Effect of the spousal designation | Spouse becomes the new holder, account continues | Value can be transferred to the spouse's plan on a deferred basis | Spouse takes over the account and continues receiving payments |
| Growth after death | Sheltered under a successor holder | Taxable | Sheltered under a successor annuitant |
| Value at death if no rollover | Received tax free | Included in income on the final return | Included in income on the final return |
| Included in Estate Administration Tax | Only if it falls into the estate | Only if it falls into the estate | Only if it falls into the estate |
Ontario allows a designation to be made either in the plan documentation or in the will. That flexibility is useful and it is also a trap, because a later will can override an earlier plan designation without anyone at the financial institution knowing about it.
What Is the Difference Between a Successor Holder and a Beneficiary on a TFSA?
A successor holder can only be a spouse or common-law partner, and they take over the account itself. The Canada Revenue Agency's position is that the successor holder immediately becomes the new holder and assumes ownership on death. The value at the date of death and any income earned after that date remain sheltered from tax. Because the account continues to exist, the deceased is not treated as having received anything from it. The successor holder's own contribution room is unaffected.
A designated beneficiary is anyone else, or a spouse who was named in the wrong capacity. The category includes a survivor who was not named successor holder, a former spouse or common-law partner, children, a subsequent survivor holder, and qualified donees. A designated beneficiary does not pay tax on an amount received up to the fair market value of the property in the TFSA at the date of death. Earnings made after the date of death are a different matter, and the treatment depends on what kind of TFSA it is.
A deposit or annuity contract stops being a TFSA at death. Where there is no successor holder, the deceased is treated as having disposed of the TFSA immediately before death for its fair market value, and the contract becomes an ordinary contract. Earnings that accrue after the death are taxable to the beneficiary under the normal rules, reported for example as interest on a T5.
A TFSA held as an arrangement in trust behaves differently. Where there is no successor holder, the trust continues and stays non-taxable until the end of the exempt period, which runs from the day after death to December 31 of the year following the year of death. Amounts up to the date of death fair market value can be paid to beneficiaries without being reported as income. Anything paid above that figure is taxable to the beneficiary and is reported in box 134 of a T4A. The trust has to distribute both the taxable and non-taxable amounts during the exempt period. If it continues afterwards, it becomes a taxable inter vivos trust with a deemed disposition at the end of the exempt period and annual T3 filings. An estate trustee therefore needs to ask the issuer which kind of TFSA it is.
A surviving spouse named as beneficiary rather than successor holder is not without a remedy. They can contribute an amount received to their own TFSA and designate it as an exempt contribution, which does not use their contribution room. The mechanism is tied to the survivor payment: the payment must be received as a consequence of the death and during the rollover period, the contribution must be made in that same period, and the survivor must designate it on Form RC240 filed with the Canada Revenue Agency within 30 days of making the contribution. The rollover period begins on the death and ends at the end of the first calendar year beginning after the death, and the Minister can accept a later time.
The amount that can be designated changed on January 1, 2026. Earnings accrued in the TFSA after the holder's death, up to the end of the rollover period, can now be designated as an exempt contribution. Under the earlier rules the designation was limited to the date of death value, and post-death earnings paid to a surviving spouse were simply taxable to them. Material written before 2026 does not reflect the change, and Form RC240 is what determines the maximum in a given case.
Two situations reduce the designable amount to nil unless the Minister allows more. Where the deceased had an excess TFSA amount immediately before death, or where survivor payments were made to more than one survivor, the statutory amount is nil, but the Minister may authorise a greater amount. This is not an automatic dead end. It means the survivor has to obtain the Canada Revenue Agency's authorisation before designating, and Form RC240 has a separate part for exactly that case.
A beneficiary who is not a survivor has no exempt contribution route at all. They may contribute what they receive to their own TFSA only if they have available room, and over-contributing attracts tax of 1% per month on the excess for each month it stays in the account.
The difference between the two words on a bank form is therefore years of tax free growth and a good deal of paperwork. For a spouse, successor holder is generally the cleaner designation.
Why Does the Estate Pay Tax on an RRSP Someone Else Received?
This is the mismatch, and it is structural rather than accidental. The full date of death value of an RRSP or RRIF is generally included in income on the deceased's final return, unless a qualifying rollover applies. That is income tax at the deceased's marginal rates, on the entire value, not on half of it as with a capital gain. The inclusion appears on the deceased's return while the money has gone directly to whoever was named on the plan.
Consider an estate where a parent leaves a $400,000 RRSP to one adult child by beneficiary designation, and the residue of the estate, worth $200,000, equally to three children.
The named child receives $400,000, outside the estate.
The $400,000 is included on the final return, producing a substantial liability at top marginal rates.
The estate is assessed for that tax, and in practice pays it from the $200,000 residue.
The three residuary beneficiaries, including the child who already received $400,000, share whatever is left.
Section 160.2 changes who can be pursued. Where the recipient of an amount out of an RRSP or RRIF is not the deceased's estate, section 160.2 of the Income Tax Act makes that recipient and the deceased jointly and severally liable for the portion of the deceased's tax attributable to the plan. The Canada Revenue Agency is not obliged to try to collect from the estate first. In the example above, the child who received the $400,000 can be assessed directly, and the Tax Court has upheld exactly that outcome.
So the residue is where the burden usually falls, not where it must fall. A will can direct that the tax on registered plans be borne by the recipient rather than the residue, which settles the position among beneficiaries. It does not remove the Canada Revenue Agency's statutory rights against the recipient, and it does not bind the Agency. Where the estate has already paid, recovering from the recipient is a question of the will's terms and the general law rather than of section 160.2.
A rollover changes the picture entirely. Where an RRSP passes to a spouse or common-law partner, or in defined circumstances to a financially dependent child or grandchild, the value can be transferred to their plan and the tax deferred. A RRIF successor annuitant simply continues the account, and only the amounts the deceased actually withdrew before death appear on the final return.
Our guide on RRSP beneficiary designations versus the will covers the designation question from the planning side, and our guide on whether life insurance forms part of an estate covers the closest parallel.
When Does a Registered Account Fall Into the Estate?
No designation was ever made, so the account is payable to the estate by default
The named beneficiary predeceased and no contingent beneficiary was named
The estate is named as beneficiary, sometimes deliberately, to fund the tax bill from the plan itself
The designation is invalid or successfully challenged, on grounds such as incapacity at the time of designation, undue influence, or a defective form
Where the account falls into the estate, it is included in the Estate Administration Tax calculation, at 1.5% of value above the $50,000 exemption, and it is distributed under the will.
Naming the estate is sometimes the right answer. Where the plan is large enough that its tax bill would swamp the residue, or the intended recipient is a minor, or the money should be held in trust, routing the plan through the estate can be the sensible design despite the tax on the value.
Where This Goes Wrong
Naming a spouse as beneficiary of a TFSA instead of successor holder. It is recoverable through the exempt contribution mechanism, but only within the rollover period and only on Form RC240 filed within 30 days of the contribution. Where the account held an excess amount, or more than one survivor was paid, the designable amount is nil unless the Canada Revenue Agency authorises more.
Assuming an RRSP designation carries over to a RRIF. It does not necessarily follow the conversion, and a designation should be confirmed on the new plan.
Leaving a designation unreviewed after a separation or divorce. A former spouse named years earlier will generally still receive the money.
Distributing the residue before the final return is assessed. Where a registered plan drives a large tax liability, an estate trustee who distributes without a clearance certificate or an adequate holdback is personally exposed, capped at the value of the property distributed.
Overlooking registered plans on a clearance certificate application. RRSPs and RRIFs are included on the asset list even where a beneficiary is named, although they never form part of the estate and are not subject to Estate Administration Tax.
Assuming a designation avoids everything. Registered plans with a named beneficiary are excluded from the Estate Administration Tax calculation, but they can still be brought back into the notional estate for a dependant support application. Passing outside the estate is not the same as being beyond reach.
If you are administering an estate with a substantial registered plan, the sequence of distribution matters a great deal. You can book a free call before anything is paid out.
Frequently Asked Questions
What is the difference between a successor holder and a beneficiary on a TFSA?
A successor holder must be the survivor, named in the TFSA contract or in the will, and takes over the account itself, so the value and all future growth stay sheltered and their own contribution room is unaffected. A designated beneficiary receives the date of death value tax free, but what happens to post-death earnings depends on whether the TFSA is a deposit, an annuity contract or an arrangement in trust.
Does an RRSP go through probate in Ontario?
Not where there is a valid beneficiary designation. The plan is paid directly to the named person and is excluded from the Estate Administration Tax calculation. Where there is no designation, or the named beneficiary has predeceased, the plan is payable to the estate and is included.
Who pays the tax on an RRSP when someone dies in Ontario?
The value is included in income on the deceased's final return, so the estate is assessed and commonly pays. That is not the whole picture. Section 160.2 of the Income Tax Act makes the recipient of the plan jointly and severally liable with the deceased for the tax attributable to what they received, and the Canada Revenue Agency need not pursue the estate first. A will can allocate the burden among beneficiaries, but it cannot remove that statutory liability.
What is a successor annuitant on a RRIF?
A spouse or common-law partner named to take over the RRIF on death. The account continues, only the amounts the deceased withdrew before death appear on the final return, and the survivor takes the required minimum withdrawals thereafter. A spouse named as beneficiary instead can still roll the funds above the year's minimum into their own plan.
Can a surviving spouse fix a TFSA beneficiary designation after death?
Often, through an exempt contribution. The payment must be received as a consequence of the death and contributed to the survivor's own TFSA during the rollover period, which ends at the end of the first calendar year beginning after the death, and must be designated on Form RC240 sent to the Canada Revenue Agency within 30 days of the contribution. Since January 1, 2026, earnings accrued after the death and paid during the rollover period can also be designated. Where the deceased had an excess TFSA amount, or payments went to more than one survivor, the designable amount is nil unless the Minister authorises a greater amount.
Should you name your estate as the beneficiary of a registered plan?
Sometimes. It brings the plan into the estate and therefore into the Estate Administration Tax calculation, but it also ensures the tax can be paid from the plan itself rather than from the residue, and it allows the money to be held in trust for a minor or a vulnerable beneficiary. It is a design decision rather than a default.
This article provides general information about Ontario law and is not legal advice. Speak with a lawyer about your specific circumstances.
