*Highlights on Tax Impacts on Heirs.
When someone passes away, understanding what happens to their investments can be confusing , where we have both federal tax rules (CRA) and Quebec provincial civil law. This overview is intended to assist in explaining, in simple language, what happens to registered and non-registered investments after death, and how it tax implications affects your spouse and children.
Quick Comparison Table
| Type of Investment | At Death | If Spouse Inherits | If Child Inherits |
|---|---|---|---|
| RRSP | Fully taxed unless rolled over | Can roll into spouse’s RRSP tax-free | Fully taxed unless child is dependent or disabled |
| RRIF | Same as RRSP | Transfer to spouse’s RRIF tax-free | Fully taxed unless child is dependent or disabled |
| TFSA | Not taxed | Spouse can take over tax-free | Child gets value tax-free, growth taxed |
| Non-Registered Investments | Deemed sold — capital gains taxed | Gains deferred to spouse | Estate pays gains; child taxed on future gains |
| Joint Accounts | May pass to joint holder | May avoid estate delays | Rare for children |
| Life Insurance | Tax-free to named beneficiary | Full amount tax-free | Full amount tax-free |
Key Points to Understand
- If your spouse inherits your registered accounts, they can roll them over tax-free. Ensure your spouse is named directly as beneficiary in the account.
- If your children inherit your RRSP or RRIF, the value is usually fully taxed unless they are disabled or financially dependent.
- Name beneficiaries directly in the account contract, not only in your will.
- Quebec uses notarial wills and liquidators instead of probate and executors.
- Incorrect or missing beneficiary designations can result in higher taxes and delays.
Simple Planning Tips
- Use a notarial will
- Review your investment accounts and life insurance policies regularly
- Set up an RDSP for disabled children
- Keep all estate documents up to date
More Information
- CRA Guide for Deceased Persons (T4011)
- CRA RRSP Death Guide (RC4178)
- Civil Code of Quebec – Succession Rules
*This article is for informational purposes only and does not constitute legal advice. For advice specific to your situation, consult a qualified legal professional .
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