Investment Executive | RRIFs, Seg Funds and Insolvent Estates
Section 160 of the Income Tax Act can have draconian consequences.
Most advisors assume that products like registered retirement investment funds (RRIFs) and segregated funds pass to named beneficiaries outside of an estate with little fuss.
But problems can arise on the tax front, especially when there is an intestacy and the deceased has left an unpaid tax bill. If the Canada Revenue Agency (CRA) finds that taxes are owing by an estate, with no funds to cover the assessment, it may try to pursue funds that have passed outside the estate. In such instances, it may try to use its very considerable collection powers under section 160 of the Income Tax Act (ITA) to impose stiff penalties and taxes on the individual beneficiaries of these products.