Life Estate, Tax at Death & Business Needs question: financially independent adult son

LifeEstate, Tax at Death & Business Needs

Ana, 78, a widow, has a $300,000 RRIF naming her financially independent adult son as beneficiary. The rest of her estate goes to her daughter. Assume the RRIF is taxed at an average rate of 40% on her final return. How much tax does the RRIF trigger, and who bears it?

A $120,000, taxed to her son as income when he receives it
B $120,000, on Ana's final return, paid from her estate
C $60,000, because only half of a RRIF is included in income
D Nothing, because naming a beneficiary rolls the RRIF over tax-free

Show the answer and explanation

Answer: B. $120,000, on Ana's final return, paid from her estate

On the death of the last annuitant, s. 146.3(6) deems the full fair market value of a RRIF to be received immediately before death, so $300,000 × 40% = $120,000 is owed on Ana's final return. A financially independent adult child cannot take a tax-deferred rollover, so the son receives the full $300,000 while the estate, which goes to the daughter, pays the tax. RRIF income is fully taxable, not half like a capital gain. Source: Income Tax Act, RSC 1985, c. 1 (5th Supp.), s. 146.3(6) and s. 146(1) 'refund of premiums' (current to 21 Sep 2026; as at 12 Oct 2026); tax rate is a stated assumption (as at 12 Oct 2026).

Common mistake

Assuming the named beneficiary, not the estate, pays the RRIF tax.

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Original study material mapped to the public CISRO curriculum; not a real test question.Not affiliated with CISRO, CCIR or any provincial insurance regulator. Verify figures and rules against current guidance before relying on them.