Naming a beneficiary on your RRSP or RRIF moves the money outside your will, but the income tax on it usually falls on your estate. Here is how BC designations work, when a spouse can defer the tax, and how to keep your plans and your will in step.
Most people fill in the beneficiary line on an RRSP or RRIF form in a few seconds, often years before they make a will. That choice can decide who receives one of your largest assets and who ends up paying the tax on it.
This guide explains what a designation does under BC law, the difference between naming a person and naming your estate, how the tax works on death, and the conflicts that arise when a designation and a will point in different directions.
What a beneficiary designation does in BC
BC's Wills, Estates and Succession Act (WESA) treats registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) as "benefit plans". As the plan holder, you can name a designated beneficiary to receive the plan on your death, and change or revoke that designation unless it was made irrevocable. A designation must be in writing and signed, and it can be made on the financial institution's form or in your will, as long as the will refers expressly to the plan.
The key consequence is set out in WESA: a benefit paid to a designated beneficiary does not form part of your estate and is not subject to the claims of your creditors. The money goes straight to the person you named, outside your will.
Naming your estate instead
If you name your estate, or name no one, the plan is paid to your executor and becomes part of your estate. That has several effects:
- The value forms part of the estate your executor administers under your will, and generally counts toward the estate the probate application has to deal with. Our article on reducing probate fees in BC explains why that matters.
- Creditors of the estate can be paid from it.
- It is distributed according to your will, which can be useful if you want the plan to be shared among several people in a particular way or held in a trust created by the will.
Neither choice is right for everyone. A direct designation is simpler and faster, while naming the estate can make it easier to balance gifts and pay debts and taxes from one pool.
How RRSPs and RRIFs are taxed on death
Under the federal Income Tax Act, the general rule is that when the holder of an RRSP or RRIF dies, they are treated as having received the fair market value of the plan immediately before death. That amount is reported on the deceased's final income tax return. For a large plan, it can create a significant tax bill in the year of death.
There are important exceptions for what the Canada Revenue Agency calls qualifying survivors:
- A spouse or common-law partner. Where a spouse or common-law partner receives the plan, the tax can generally be deferred by transferring the funds to their own RRSP, RRIF or an eligible annuity, within the time limits the CRA sets out. For a RRIF, a spouse or common-law partner can also be set up to take over as the successor annuitant, so payments simply continue.
- A financially dependent child or grandchild. A child or grandchild who was financially dependent on the deceased may also qualify. If the dependency was due to a physical or mental impairment, options include a transfer to their own registered plan or a registered disability savings plan. Otherwise, the option is generally limited to an annuity that ends by age 18.
Where a qualifying survivor receives the plan through the estate rather than as a named beneficiary, the executor and the survivor may be able to file a joint election so the same tax treatment applies. These rules are technical, and the plan holder's accountant should be involved in planning.
Who pays the tax when the beneficiary is someone else
This is where designations can surprise families. If you name an adult child or a friend as beneficiary, they generally receive the full plan value, but the income tax on that value is reported on your final return and is paid by your estate. The people who inherit the rest of your estate can end up bearing tax on money they never received.
For example, a parent names one child on an RRSP and leaves the house to another child through the will. The RRSP goes directly to the first child, while the tax on it comes out of the estate, reducing what the second child receives. That may not be what the parent intended.
The Income Tax Act also makes the person who received the plan jointly and severally liable with the deceased for the share of the deceased's tax that arises from the plan, so a beneficiary can be pursued if the estate cannot pay. Planning for who bears the tax is part of a well-drafted will.
When your designation and your will disagree
Because designations can be made in two places, conflicts happen. WESA sets some rules:
- A designation in a will can be changed by a later designation that is not in a will, such as a new form filed with your bank.
- A will can revoke an earlier designation made on a plan form only if the will relates to that designation, generally or specifically.
- Revoking a will revokes any designation made in it, and revoking a designation does not bring back an earlier one.
- If a named beneficiary dies before you and the designation does not say what happens to their share, it goes to any surviving designated beneficiaries, and if there are none, to your estate.
After separation, do not assume a designation in favour of a former spouse has changed. Check every plan form. Our article on updating beneficiaries after separation explains the wider picture.
A designation check-up
Review your designations when you retire, open a RRIF, marry, separate, have children or update your will. Questions to ask:
- Does each plan name the person you intend, with an alternate?
- If a beneficiary is a minor, have you appointed a trustee for them? WESA allows you to do this in the same way as a designation. See our article on inheritances for minor children.
- If a beneficiary receives disability benefits, would a direct payment affect them?
- Does your will say how the tax on registered plans should be borne?
- Is your attorney under an enduring power of attorney aware that, under WESA, they cannot make or change a designation for you without a court order?
Review your RRSP and RRIF beneficiaries alongside your will
Our wills and estate planning lawyers can review your RRSP, RRIF and other plan designations alongside your will, explain how each choice affects your beneficiaries and your estate, and prepare a will and designations that work together.
Call 604-259-2844 or send us a message to arrange a consultation at our Vancouver office.
Sources
- Wills, Estates and Succession Act, SBC 2009, c 13, ss 1 (benefit plan), 85, 91, 92, 95-97 — Wills, Estates and Succession Act, SBC 2009, c 13 (checked October 12, 2026)
- Income Tax Act, s 146(1) (refund of premiums), 146(8.1), 146(8.8); see also s 146.3(1), (6) and s 160.2 — Income Tax Act, RSC 1985, c 1 (5th Supp), s 146 (checked October 12, 2026)
- Canada Revenue Agency, Information Sheet RC4177, Death of an RRSP Annuitant — Death of an RRSP Annuitant (RC4177) (checked October 12, 2026)
- Canada Revenue Agency, Amounts paid from an RRSP or RRIF upon the death of an annuitant — Amounts paid from an RRSP or RRIF upon the death of an annuitant (checked October 12, 2026)
General information about British Columbia law as at the date shown, not legal advice. Reading this article does not create a lawyer-client relationship. Please speak with a lawyer about your own circumstances.