Estate planning basics for retirees: wills, beneficiaries and the tax on a final return

The core documents

Most estate plans rest on three documents. Their names and formal requirements vary by province, so it's worth checking what your province calls them and how they must be signed and witnessed.

• A will names an executor (called a liquidator in Quebec), says who receives your assets and can name guardians or set up trusts.
• A power of attorney for property lets someone you choose manage your finances if you can't, and can take effect immediately or only on incapacity.
• A power of attorney or directive for personal care, sometimes called a health care directive or representation agreement, names someone to make health and personal decisions and can record your wishes.

How assets pass: the will and outside it

Assets in your sole name generally pass through your will and may need to go through probate, the court process that confirms the will and the executor's authority. Each province sets its own probate process and fees, which can range widely, so it's worth looking up your province's current rules rather than relying on estimates from elsewhere.

Some assets pass outside the will. Property held in joint tenancy with right of survivorship usually goes to the surviving owner. RRSPs, RRIFs, TFSAs, life insurance and some pensions can name a beneficiary directly in most provinces, so the money goes to that person without passing through the estate. In Quebec, designations on registered plans generally have to be made in the will, except for certain insurance-based products.

Joint ownership with an adult child is sometimes used to avoid probate, but it can expose the asset to the child's creditors or marriage breakdown and raise questions about whether the child is meant to keep it or share it. Those risks are worth weighing carefully.

Spouses, successor holders and rollovers

Registered accounts have special rules when they pass to a spouse or common-law partner. An RRSP or RRIF left to a spouse can generally roll over to the spouse's own registered plan without immediate tax. For a TFSA, naming a spouse as successor holder lets the account continue in their name, without using their contribution room.

When a registered account passes to anyone else, such as an adult child, the rules change. The CRA's guidance on RRSPs, RRIFs and TFSAs at death explains the treatment, including limited exceptions for financially dependent children or grandchildren.

A worked example: Frances's RRIF

Suppose Frances is 78, widowed and lives in Ontario. Her RRIF holds $400,000. If it earns 5% a year and she takes only the minimum, her withdrawal this year is about $25,440, and the calculator shows the balance at about $334,956 at the start of 85, about $257,319 at 90 and about $146,103 at 95.

Those numbers matter for her estate. Whatever remains in the RRIF when she dies will generally be included in her income on her final tax return, because there's no spouse to receive it on a tax-deferred rollover.

The tax on a final return

Suppose that when Frances dies, her RRIF holds $310,000 and her other income that year is $42,000. On $42,000 alone, the calculator estimates about $5,042 of federal and Ontario tax. With the RRIF added, her final-year income becomes $352,000 and the estimate rises to about $142,858, with a top marginal rate of about 54%.

That's about $137,816 of additional tax, paid by the estate before her heirs receive their shares. Even if the RRIF names her children as beneficiaries and the money goes to them directly, the tax is generally owed by the estate, which can create an imbalance if other heirs inherit the estate assets that pay it.

This is one reason some retirees with large RRIFs and no spouse look at drawing more each year, an approach discussed in the RRSP meltdown guide. TFSA balances, by contrast, pass without income tax on the account value.

Government benefits at death

CPP pays a one-time death benefit of up to $2,500 to the estate or eligible survivors. A surviving spouse or common-law partner may also qualify for a survivor's pension; in 2026 the maximum is $803.54 a month for survivors under 65 and $904.59 a month for those 65 and older. These benefits need to be applied for through Service Canada. Our guide to CPP survivor benefits explains how they're calculated.

OAS stops after death, and any payment issued for a month after the month of death usually has to be returned. In Quebec, QPP provides comparable benefits through Retraite Québec, with amounts that are similar but not identical.

Practical steps that help the people you leave behind

Much of the work of settling an estate is simply finding things. A clear record saves executors time and reduces the chance of missed accounts or benefits.

• Keep a current list of accounts, pensions, insurance policies and debts, and where the documents are kept.
• Review beneficiary and successor designations after major life events, such as a death, marriage or separation.
• Note digital accounts and how executors can access them, without writing passwords into the will itself.
• Talk with your executor about your wishes and where to find your documents.
• Revisit the plan every few years, or when tax rules or family circumstances change.

Where to go from here

Estate planning sits at the end of the retirement timeline, but its choices affect withdrawal order, account types and how much income you draw. The retirement timeline shows where these steps usually fit, and the RRIF minimum calculator projects how a RRIF balance may change over time. Couples may also find the couples planning page helpful.

Because wills, probate and powers of attorney are governed provincially, many people work through these documents with a lawyer or notary in their province, and confirm the tax treatment of registered accounts with the CRA.