When an annuitant of a RRSP makes over-contributions (or unused contributions) to his or her RRSP and wants to withdraw them without penalty, the Canada Revenue Agency (“CRA”) will permit the annuitant to withdraw the over contributions and claim a deduction accordingly, as long as the CRA can be shown that the annuitant intended to fully deduct the contributions in the year made or the year before, or the contributions were not made with the express intention to withdraw them later and claim the deduction.

Assuming the appropriate filings are made with the CRA, the annuitant is expected to include the over-contributions made in income in the year of withdrawal but the annuitant can claim a deduction for tax purposes for the amount of the over-contributions withdrawn.

What happens if the annuitant dies without having withdrawn the over-contributions made to his or her RRSP in the preceding year?: Can the deceased annuitant’s estate claim a deduction for the over-contributions against the income included on the tax return in the year of death?

According to the CRA, generally yes, provided all conditions are met.

Regardless of the circumstances, the CRA will look for the over contributions not deducted to be included in the full value of the annuitant’s RRSP in computing the deceased annuitant’s income in the year of death.

However, the CRA confirmed that, but for the death of the annuitant, the conditions described above would have been satisfied, a deduction for the over-contributions could be claimed in the final the terminal return of the deceased annuitant. The estate would not make the usual filings for confirm the deduction because they do not apply in this circumstance. What CRA recommends is that the estate contact them, either by phone or in writing, to establish the amount of the deduction to be claimed and simply insert the deduction on the appropriate line of the terminal tax return.

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