RRSPs are handy vehicles that, during your lifetime, allow you to manage your taxable income in any given year. However, upon death, they can become a problematic tax liability. For example, if one does not have a spouse to transfer an RRSP or RIF to, the funds within the RRSPs or RIFs become fully taxable in the year of one’s death.
In light of these circumstances, the ITA now permits donors to name a charity as a beneficiary of their RRSPs and RIFs. In this scenario, the proceeds of the RRSPs and RIFs are paid directly to the charity on death.
Upon receipt of the gift, the Word & Deed will issue a tax receipt for the value of the RRSPs and RIFs to the estate of the donor. The taxes payable by the estate for the disposition of the RRSPs and RIFs on death is then eliminated as a result of the charitable receipt received.