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Close to 4,000 questions have been asked over the years by readers of this newsletter, which is a lot. Here’s how I choose the ones to answer. First off, the question has to be one of fairly wide interest. Also, it can’t be too personal, too specific, too technical or too odd.

I’m going to share a question about registered retirement income funds that came in recently and initially struck me as a bit too out there. But then I changed my mind on the basis that answering it could be a chance to clear up some misinformation about RRIFs and help people manage them better.

The question reads as follows: “Rob, I recently heard that a RRIF, if not used up, cannot go to a beneficiary after your spouse dies. That any money left if you are a sole survivor goes to the government if one does not withdraw all funds. Is this true?”

The short answer is no. For more detail, I got some help from Jane Bolstad, a Calgary-based certified financial planner (CFP). Here’s Ms. Bolstad’s response to this reader:

“Good on you for thinking through your estate planning and for questioning advice you hear out there. On the death of a RRIF holder, the RRIF can be transferred tax-free to a qualifying beneficiary, which would be a spouse/common-law partner or a financially dependent child or grandchild.

If there is no qualifying beneficiary, as is the case you described in your question, you can leave your RRIF to your estate or to whomever you want to by naming them as beneficiary on the plan (with the exception of Quebec where it must be done through your will). So, the answer to your question is no, your RRIF would not go to the government. It would go to your estate and distributed according to your will, or to whomever you designated.

Keep in mind that when the second spouse dies (and no qualifying beneficiary remains), there will be taxes related to the RRIF. The fair market value of the RRIF is included on the deceased’s final tax return and taxed at their marginal rate. If you had designated a beneficiary, they would receive the full value of the RRIF and the estate would have to pay the taxes. If the estate didn’t have enough assets to pay the taxes, the beneficiary would be held liable.

I recommend that you discuss this further with a wills and estates specialist to ensure that you are passing on your assets in the best way given your situation.”

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Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.

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