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RRSP/RRIF Losses after death

Under the current tax rules, when the annuitant of an RRSP or RRIF dies (absent a tax rollover to a surviving spouse, partner, dependent minor child or dependent disabled child) the fair market value (FMV) of his or her RRSP immediately before death must be included in his or her final tax return for the year of death (the terminal return).

But what if the FMV of that RRSP or RRIF that was included on the deceased annuitant’s terminal tax return declines in value after death but before it’s paid out? 

Up until now the estate ends up having to pay tax on an amount that is actually greater than the amount received on the windup of that RRSP or RRIF.

The 2009 Budget proposes to solve this problem by allowing the amount of post-death decreases in the value of the RRSP or RRIF be carried back and deducted against the year-of-death RRSP/RRIF income inclusion on the deceased’s terminal return.  This measure applies to all final RRSP or RRIF payouts made after January 01, 2009.