RIF Quiz - I failed it :)

OK so, today I visited my bank to start wrapping up my Dad's banking/investing affairs. Thanks to me working with my Dad over the past year since my Mom passed to get affairs in order - wrapping up his banking & investments will be very easy.

BUT... while I was there... I had had to initiate closing his existing RIF and I ran into something that surprised me on my understanding on this process. I am sure many of you will say "Ohh Perry - of course that's how it works - I knew that". Some will be like me and be surprised. And most of the rest of you haven't even thought about it as that is a distant concern which you will figure out when it happens.

SOO... no cheating and googling it - I am going to ask the RIF QUIZ question (make it a poll). After you read the question - come up with your answer so you can answer the POLL and then keep reading to get the RIGHT answer... :)

QUIZ...
Your Loved One has a RIF and passes away. You are the Beneficiary. The bank liquidates the assets in the RIF, reports the transaction to CRA, and pays out the proceeds to the Beneficiary. Question: WHO will receive the tax slips to include in their Annual Income Tax Filing to report and pay taxes on the paid out proceeds? 1) The Loved One's ESTATE, 2) The Beneficiary receiving the proceeds?

Got your answer in your head??? ...... OK continue reading....

The answer is 1 - the Estate of the Loved One is responsible for reporting the income from the RIF liquidation as part of the last year of income tax. NOT the beneficiary receiving all the proceeds. I knew the liquidated proceeds withdrawn from the closing RIF had to be taxed - but i just assumed it was the person receiving it - not the estate. SILLY ME.

OK do the poll :)

Did you know the correct answer?

YES - I knew the income was reported by the Estate's last income tax & taxes paid

57%

NO - I assumed the person receiving the proceeds from the RIF would report & pay the taxes

23%

I DIDNT KNOW so I didnt Guess :)

21%

302 votes · 54m left

5,262 views

27 Comments

DbleTrble

@nimble_minx · 5d

Yup, liquidation is part of the wind down of the estate. Estate pays the taxes, which is why it can be such a hit if the balances are high. Learned a lot when I did the same for my Dad’s estate. Also make sure if you have a spouse that you have them as your successor for your TFSA.

Dividend Earner

@dividendearner · 5d

And there is another catch.

Everything is done on the date of death.

Any money earned after that, the beneficiary pays taxes on that for the year. And because the process takes so long, there can be meaningful changes in values which are taxable to the beneficiary even if you don’t have the money in your account.

This happened to my mom once my dad passed away.

forester @foresters · 5d

Yup, I had done some reading about it not long ago. The Estate of the deceased is responsible for filing a Terminal Tax Return and paying the taxes due on any disposed and/or deemed-disposed assets. Of course, if beneficiaries are bequeathed things like real estate property (especially if dividing shared ownership amongst multiple beneficiaries), that can potentially get tricky, so it’s best to consult a tax professional.

Again, thinking of you and your loved ones during this time, Perry. ❤️

Karin @karinfre1 · 3d

Thanks again for taking care of this Perry. ❤️

Brent Smith

@doubletap204 · 4d

This is why I got into investing. My Dad had a portfolio manager. I asked them to take me on when he passed and they declined. They didn't have him open a TFSA so he was taxed on the entire portfolio. 6 figure tax bill. I'm sure my Dad had no idea it would be that much. He thought he was leaving it all to me.

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