On death, RRSPs and RRIFs belonging to the deceased are deemed
to have been included in the deceased income immediately before
death and are taxed on their full market value as of the date of
death.
Created by s. 60.011 of the Income Tax Act, a Lifetime
Benefit Trust ("LBT") allows the rollover of an RRSP or
RRIF on a tax-deferred basis to a beneficiary who is the child or
grandchild of the deceased who has a disability due to a mental
infirmity and who was financially dependent on the deceased at the
time of death. The LBT is set up in the deceased's Will and
directs the estate trustees to purchase a qualifying trust annuity
using the funds in the RRSP or RRIF. The annuity payments are paid
to the LBT, to be directed according to its terms, rather than to
the beneficiary directly.
