Proper tax planning essential for your will
You will have been deemed to have cashed in the registered plans in the year of your death, taking the capital into income.
The tax owing will be payable from the residue of your estate. Unless you plan for this, you could inadvertently leave one or more of your children (or another relative) in financial difficulty.
For example, suppose that upon death you have a RRIF that is valued at $500,000. You name your daughter as the beneficiary. Your son receives the balance of the estate, which consists mainly of a vacation home worth about the same amount. However, the $500,000 in the RRIF is treated as income by the Canada Customs and Revenue Agency in the year you die and is taxed at a marginal rate of, say, 48%. So the estate owes the government $240,000, which becomes your son’s responsibility. Since you haven’t left him any money to speak of, he has to sell the vacation home to satisfy the debt – something you never intended.