Difference between pages "Taxation: RRSP & RRIF & TFSA (16:XIII)" and "Introduction to Family Law (3:I)"

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== A. RRSP: Registered Retirement Savings Plan ==
== A. Note on the Family Law Act and this Manual ==


In British Columbia, a person may by will gift a property which they are entitled at law or in equity at the time of their death. This means that the proceeds from a deceased’s Registered Retirement Saving Plan (“RRSP”) can be distributed to the beneficiary outside of the will if a valid beneficiary designation has been made.  However, please note that the deceased’s estate will likely need to pay taxes on the value of the RRSP as at the deceased’s date of death. This will be taxed as the deceased’s income for that year.  
On March 18, 2013, British Columbia’s ''Family Law Act [FLA]'' came into force. The ''FLA'' is the culmination of many years of research and policy development, and has transformed British Columbia family law dramatically .  


A person is “deemed” to have disposed of all assets at the moment before death and is accordingly taxed in the year of death as such. For example, if the deceased owns a rental property, then that rental property is considered to be sold at the moment of the deceased’s death and as a result, the deceased may have earned capital gains from this deemed disposition. Taxes will then be paid on these capital gains.
The current Manual chapter deals primarily with the ''FLA'' rather than the previous ''Family Relations Act [FRA]''. If you are starting a legal challenge in family law now or in the future, the ''FLA'' will apply to your case. However, if you made a claim for property division before the ''FLA'' came into force or if you are making a claim to enforce, set aside, or replace an agreement respecting property division made before the ''FLA'' came into force (March 18, 2013), then those claims will be decided under the ''FRA''; all of your other claims (such as for parenting arrangements, child support, spousal support) will be dealt with under the ''FLA'', or the ''Divorce Act (DA)'', if it applies.  
Additionally, the value of any RRSP or RRIF will also be considered to have been earned in the year of death. This is significant because the inclusion of all these capital gains will most likely bump the deceased to the highest tax bracket. In B.C., this bump could mean that an individual is taxed close to 50% of the income.  


The major exception to this rule is the “spousal rollover” rule in section 73 of the ''Income Tax Act'' (“''ITA''”). This rule effectively defers payment of taxes owing from the deemed disposition if the asset is given to the spouse of the deceased until the death of the spouse.  
If your case still involves the ''FRA'', we encourage you to look at an older version of this Manual, as we will not deal with the ''FRA'' in this version.  


If a beneficiary has been designated to receive the proceeds of a RRSP, those proceeds will pass directly to the beneficiary.  However, the deceased will be considered to have earned the entire value of the RRSP during their year of death and the estate must declare the value of the RRSP on the T1 Terminal Tax return.  Accordingly, unless a roll-over provision, such as the spousal roll-over, applies, the estate will be liable to pay taxes on the value of the RRSP.
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If the estate is unable to pay the taxes, the beneficiary receiving the proceeds will be liable to pay the taxes owing (s 160.2(1) of the ''ITA'' provides that the estate and a designated beneficiary are jointly and severally liable for tax on the value of the RRSP at the date of death). 
 
== B. RRIF: Registered Retirement Income Fund ==
 
The same rules applies to RRIFs as they apply to RRSPs.
 
== C. TFSA: Tax-Free Savings Account ==
 
TFSAs receive specialized treatment under the ''Income Tax Act''. As TFSAs came into effect in 2009, the proportion of the chapter will not be material to the estate of deceased taxpayers who died in 2008 or earlier.
 
The fair market value of the TFSA will be received by the estate of the deceased taxpayer or any gains that accumulated in the account will continue to be tax-free until the end of the year following the death of the account holder. The tax-free status of the TFSA is preserved if the deceased taxpayer named their spouse or common-law partner as the successor account holder.
 
It is unlikely that tax liability for the income generated by the TFSA from amounts contributed to the TFSA during the taxpayer’s lifetime. This is different from RRSPs or RRIFs.
 
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Revision as of 00:28, 11 September 2021

This information applies to British Columbia, Canada. Last reviewed for legal accuracy by the Law Students' Legal Advice Program on August 12, 2021.
LSLAP Manual
LSLAP Manual
This page is from the
Law Students' Legal
Advice Program Manual.
See the full contents.
LSLAP Manual
Introduction
Chapters
3. Family Law
 · I. Introduction

 · II. Governing Legislation and Resources
 · III. Marriage
 · IV. Divorce
 · V. Uncontested Divorce
 · VI. Simple Divorce Procedure
 · VII. Alternatives to Divorce
 · VIII. Family Violence
 · IX. Assets
 · X. Spousal and Child Support
 · XI. Parenting Orders/Guardianship/Contact
 · XII. Children and the Law
 · XIII. Adoption
 · XIV. Name Changes
 · XV. Court Procedures

 · Appendix A: Glossary
v • d • e



A. Note on the Family Law Act and this Manual

On March 18, 2013, British Columbia’s Family Law Act [FLA] came into force. The FLA is the culmination of many years of research and policy development, and has transformed British Columbia family law dramatically .

The current Manual chapter deals primarily with the FLA rather than the previous Family Relations Act [FRA]. If you are starting a legal challenge in family law now or in the future, the FLA will apply to your case. However, if you made a claim for property division before the FLA came into force or if you are making a claim to enforce, set aside, or replace an agreement respecting property division made before the FLA came into force (March 18, 2013), then those claims will be decided under the FRA; all of your other claims (such as for parenting arrangements, child support, spousal support) will be dealt with under the FLA, or the Divorce Act (DA), if it applies.

If your case still involves the FRA, we encourage you to look at an older version of this Manual, as we will not deal with the FRA in this version.

v • d • e
 
Chapters 1-7
Criminal Law  · Youth Justice  · Family Law  · Victims  · Public Complaints · Human Rights  · Workers Compensation
Chapter One:
Criminal Law
Chapter Two:
Youth Justice
Chapter Three:
Family Law
Chapter Four:
Victims
Chapter Five:
Public Complaints
Chapter Six:
Human Rights
Chapter Seven:
Workers' Compensation
I. Introduction · II. Governing Legislation, Policy & Guidelines · III. Introduction to Compensation Claims for Injured Workers · IV. LSLAP's Role at the Initial Decision Level · V. Limitation Periods and Timing of Decisions · VI. Making a Claim · VII. The Claim Acceptance Process · VIII. Worker Status · IX. Disability and Causation · X. Time Limits and Procedures · XI. Claim Benefits · XII. Appeals · XIII. Health and Safety Regulations in the Workplace · XIV. Assessments of Employers · XV. The WCB Fair Practices Officer · Appendix A: Abbreviations · Appendix B: List of Cases · Appendix C: Referrals · Appendix D: Resources · Appendix E: Claims Process · Appendix F: Checklist for Interviews · Appendix G: Checklist for Appeals · Appendix H: Sample Authorization Form
© Copyright 2023, The Greater Vancouver Law Students' Legal Advice Society.


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