Your Spouse Dies: What Steps Should you Take?

The death of your spouse is a deeply moving event that can also lead to financial stress. Here is what you need to know.

Did the deceased person receive benefits from the government?

If your spouse received a disability pension, a retirement pension or allowances from the Government of Canada and the Gouvernement du Québec for the family, you must inform Retraite Québec as soon as possible to avoid having to repay overpayments.

If necessary, contact Service Canada, particularly regarding the Old Age Security pension . For example, if you received the Allowance between ages 60 and 64 and your spouse dies, the financial assistance can be converted to the Allowance for the Survivor.

What are the pensions and benefits provided in the event of death?

You could receive one or more benefits under the Québec Pension Plan (QPP) if your spouse worked in Québec and contributed sufficiently to the QPP.

The death benefit is a payment of a maximum amount of $2500 paid in priority to the person who paid for the funeral expenses. After 60 days, if no application has been filed, the death benefit is paid to the person who filed the application first and who qualifies as an heir, the person who paid the funeral expenses or the liquidator. The amount is taxable and must be included on the estate's income tax returns.

The surviving spouse's pension ensures basic income to the spouse of the deceased. It is paid on the last working day of each month.

To receive it, you must have spousal status under the QPP on the day of your spouse's death. Therefore, you had to either be married to that person, in a civil union or in a de facto union, that is, you had to have been living with that person for at least three years, or at least one year if you had a child together.

You will receive the surviving spouse's pension for life, as of the month following your spouse's death. There is no deadline to apply. If you apply for it later, please note that you will only be able to receive the equivalent of a maximum of 11 months of pension payments.

The amount of the surviving spouse's pension varies according to your age and the earnings entered in your spouse's file under the Québec Pension Plan. It also depends on the following factors:

• You are responsible for your deceased spouse's children.
• Your spouse was receiving the retirement pension supplement.
• You are receiving a disability or retirement pension under the QPP.

What pensions can be combined: retirement, disability and/or surviving spouse's pension?

If you are not yet receiving your retirement pension, you can contact Retraite Québec to see whether it would be beneficial for you to apply for it now. If you are already receiving a disability or retirement pension, the amount of your surviving spouse's pension will be added to your payment every month. However, the combination of several benefits under the QPP is limited to a maximum that varies for each person.

The orphan's pension could be paid to you for each child under age 18 for whom you are responsible, even if they are not your spouse's biological or adopted children. The pension is a fixed monthly amount paid on the last working day of each month.

To receive the death benefit, the surviving spouse's pension or the orphan's pension, you must file an application.

Other benefits provided in the event of death

There are other death benefits to which you could be entitled. That is why it is advised to trace the places where your spouse worked before his or her death and to obtain information from the administrators of the various pension plans to which he or she contributed. Generally, you must pay taxes on the benefits you receive and the amounts you inherit from a pension plan. It is also important to review your spouse's life insurances (individual and group). The benefits provided could help you get through this difficult time financially and pay the taxes due upon death. In most cases, you do not pay taxes on the life insurance benefit and the savings accrued within the insurance policy.

Tax benefits

If you are recognized as the spouse of the deceased under the Act, you can benefit from certain tax benefits:

• If your spouse left you assets, these are considered to have been sold at their purchase price. Therefore, there is generally no capital gain resulting from this.
• Certain assets held in registered accounts can be transferred tax-free between spouses, for example, if you are left an inheritance or if you are the beneficiary. This is the case for registered retirement savings plans (RRSPs) and registered retirement income funds (RIFFs), which can be transferred to the spouse.
• The contributions made to an RRSP prior to the death and that are not deducted can be used to reduce the deceased's income up to his or her maximum contribution allowed for the year. However, it is not possible to contribute to the deceased's personal RRSP after his or her death. The contributions made by this person are allowed if they are made to the surviving spouse's RRSP in the year of the death or within 60 days after the end of that year. This reduces the deceased's RRSP contribution room.
• If you inherit your spouse's tax-free savings account (TFSA), you can transfer the amounts into your TFSA without it impacting your TFSA contribution room.

Other steps to take

• Review your budget and your savings plan. Living without a spouse often results in higher expenses, as all costs fall on one person.
• Update your retirement plan to take into account all the changes resulting from your spouse's death, that is, new income and expenses and, in certain cases, postponing or anticipating the date on which you expect to retire.
• Update your will, your protection mandate and the list of beneficiaries of your insurances.
• Verify with your employer whether you can benefit from two days of paid leave and three days of unpaid leave, as provided for in the Act respecting labour standards.

Are you the estate liquidator?

If you are your spouse's estate liquidator, you must file his or her income tax returns. All your spouse's assets, including his or her investment accounts, are considered to be disposed of at fair market value upon his or her death. Therefore, the resulting capital gain, which is generally the difference between the market value of the assets at the time of the death and the purchase price, must be included on the income tax returns. For example, the capital gain on a cottage or on non-registered investments made outside of an RRSP or TFSA. However, this usually excludes the main residence. The income tax returns of a deceased person must be filed by the latest of the following dates:

• six months following the date of death;
• on 30 April of the following year.

If your spouse dies before 1 May of a given year without having filed his or her income tax returns for the previous year, a 6-month period after the date of death is granted.

For more information on the role of estate liquidator, consult the Managing someone's final affairs  section on Éducaloi's website.

Find out what are the other steps you must take by consulting the What to do in the event of death  section on Québec.ca and the Steps to take in the event of death section on Retraite Québec's website. Do not hesitate to consult your notary or attorney to find out the rules that apply to your situation.