RRSP for Life: What Budget 2026's Proposal Means for Your Estate Plan

Every Canadian with an RRSP runs into the same deadline: by the end of the year you turn 71, the plan has to be converted into a RRIF, used to buy an annuity, or cashed out. The federal budget tabled on November 5, 2026 proposes to end that step. Under what the government calls an “RRSP for life,” the RRSP and RRIF rules would be merged into one account that can stay open for the rest of your life, and possibly longer.

Most of the coverage has focused on retirement income. For estate planning, the more interesting part is what happens when the account holder dies. This article explains what is being proposed, what would not change, and what it means for your Will and your beneficiary designations today.

What the budget proposes

The proposal has three parts:

• No forced conversion at 71. Your RRSP would simply continue. You would no longer need to open a RRIF and move your savings into it.
• A spouse could take over the plan. A surviving spouse or common-law partner could be named as a successor holder of the RRSP, so the account itself continues in their name after your death. RRIFs and TFSAs already allow this. RRSPs currently do not.
• Simpler transfers on death. Today’s indirect rollover rules would be replaced with direct, tax-free transfers from the deceased’s RRSP into the RRSP of a surviving spouse or a financially dependent child or grandchild.

What would not change

The proposal is narrower than some retirement groups had asked for. According to the budget:

• Contributions would still end in the year you turn 71.
• Minimum withdrawals would still apply, starting in the year after you turn 71, calculated much as they are for RRIFs today.
• The tax on death would still apply when the plan passes to anyone other than a spouse or certain dependants: the full value is generally included as income on the deceased’s final return.

In other words, the tax picture for most people stays the same. What changes is the paperwork, and the way a plan can pass to a surviving spouse.

How it works today when an RRSP holder dies

When someone dies holding an RRSP, the plan is generally treated as if it had been cashed out the moment before death, and its value is added to their income for that year. A large RRSP can push the final return into the top tax bracket.

There is an important exception for spouses. If the surviving spouse or common-law partner receives the RRSP, the tax can be deferred by transferring the funds into the survivor’s own RRSP or RRIF. In practice, this is not always smooth:

• The funds have to be paid out and then moved into the survivor’s plan, which involves forms, timing and sometimes delays at the financial institution.
• If no beneficiary was named, or “my estate” was named, the RRSP falls into the estate. A spousal rollover may still be possible, but it needs an election by the estate trustee and the spouse, and the plan’s value is now counted for probate fees. (Our guide to probate fees in Ontario explains how the Estate Administration Tax is calculated.)

What a successor holder would change

A successor holder steps into the deceased’s shoes. The account is not collapsed or transferred: it simply continues, with the surviving spouse as the new holder. Tax is deferred until the survivor makes withdrawals or dies.

This is how TFSAs work today, and it is noticeably simpler for families. There is no payout, no transfer between institutions, and less room for an administrative error that turns a tax-free rollover into a taxable event. Because the plan never becomes part of the estate, it also stays outside the probate calculation, just as a plan with a properly named beneficiary does now.

The draft legislation released with the budget already includes a successor holder for RRSPs. The government is still consulting on whether and how the feature should work, though, so the details may change.

What to do now

Nothing about this proposal is law yet. The budget came with draft legislation, but no start date, and the Department of Finance is accepting comments until January 8, 2027. Once the rules are passed, financial institutions will need time to offer the new account. In the meantime:

• Check your designations. Make sure every RRSP, RRIF and TFSA names the beneficiary you intend, and that no plan still names a former spouse, a person who has died, or “my estate” by default.
• If you have a RRIF, consider naming your spouse as successor annuitant. That option already exists, and it gives your spouse the same continuity the proposal would bring to RRSPs.
• Do not delay your conversion at 71 waiting for the new rules. Until legislation is passed, the existing deadline still applies.
• Keep your Will and your plans in step. When an RRSP goes to one person and your estate goes to others, the tax on the RRSP is usually paid by the estate. Your Will should account for who carries that cost, whatever form the new rules take.

Plan it with your Will

Registered plans are often among the largest assets in an estate, and they pass under their own rules, not under your Will. That makes them easy to overlook when a Will is drafted, and easy to get wrong. At Mardini Law, we review your designations alongside your Will, so that your plans, your estate and your family’s tax bill all point in the same direction.

If the RRSP for life becomes law, we will update this article with the final rules and what they mean for existing RRSPs and RRIFs.