TFSA and RRIF: What is the difference between beneficiaries, successor holders and successor annuitants?

However, there is an exception to this rule: the exempt contribution. Suppose you name your spouse or common-law partner as the beneficiary of your TFSA account. They may be able to use your TFSA assets to contribute an amount not limited by their available contribution room. In this case, they would “transfer” the assets from your TFSA to their TFSA.

There is a short window after the death of a TFSA holder to make an exempt contribution. If you want to make sure your surviving spouse or common-law partner can keep your TFSA intact, it’s much simpler to name a successor holder. However, this provision allows a spouse or common-law partner to use your TFSA assets to make a TFSA contribution in excess of their available contribution room.

Registered Retirement Income Funds

On your RRIF, you can list a beneficiary or a successor holder. To name a beneficiary, the beneficiary can be anyone or even your estate, as in the case of a TFSA. But with the designation of a successor holder, the successor annuitant designation for RRIFs is limited to your spouse or common-law partner, also similar to a TFSA.

Note that a beneficiary designation on your RRSP is not “carried over” when you convert your RRSP to a RRIF. Instead, you must make a new designation, whether it is a beneficiary or a successor annuitant. The designation of successor annuitant can only be chosen for RRIFs, not for RRSPs.

Differences between a beneficiary and a successor annuitant for a RRIF

Designating a successor annuitant allows your spouse or common-law partner to take over your RRIF upon your death, without the need to transfer the funds. As with a successor holder of a TFSA, the successor annuitant of a RRIF would effectively assume ownership of the RRIF account without any tax consequences to the estate.

The successor annuitant then has the following options:

  • continue to receive RRIF payments,
  • transfer the assets to their own RRIF,
  • or if they prefer to delay income, they can transfer the assets to their RRSP (if they are 71 or younger).

If they decide to transfer the RRIF assets to their RRSP, their RRSP contribution room will not be affected. (That is, they don’t have to worry about whether they have enough RRSP contribution room.)

If you designate your spouse or common-law partner as beneficiary of your RRIF (to be clear: not as successor annuitant), the assets of your RRIF will be transferred to your spouse and your RRIF account will then be closed. However, your estate will not have to include the value of the RRIF on your final tax return or pay income tax. This is also true if you designate a financially dependent minor child or grandchild as your beneficiary. In this case, the beneficiaries will receive the RRIF assets until the date of death.

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