The payments that the deceased received under either the Canada or Quebec Pension Plan (depending on their province of residence) and the federal government's Old Age Security cease in the month following the death. Those payments cannot be transferred to the surviving spouse or estate.
However, under certain conditions some death benefits (paid as lump sums) or annuities may be payable to the surviving spouse or to the estate (generally, the estate receives the benefits if there is no surviving spouse or if the spouse declines them).
Below is an overview of how these may be paid out.
1. Lump Sums
Public Pension Plans (Death Benefits)
- If the deceased had contributed sufficiently to the Canada Pension Plan (or to the Quebec Pension Plan, depending on the province of residence), the estate can claim a lump sum of up to $2,500. If unclaimed after 60 days, the money may be paid to the person or charitable organization that paid for the funeral costs, or the surviving spouse or next of kin
- Note that in Quebec, the death benefit is payable to the person or charitable organization that paid for the funeral. The estate or spouse may only claim the benefit if it is unclaimed after 60 days
- This benefit is taxable
Private Pension Plans
- Under a Defined Contribution Pension Plan or a Defined Benefit Plan, if the plan member dies before retirement, the surviving spouse receives a lump sum death benefit. If the plan member did not have a spouse or if the spouse declines the benefit, it is paid to a designated beneficiary or the estate
- Under a Simplified Pension Plan, the spouse receives the total of the deceased's accounts. Or, if there is no surviving spouse or if the spouse declines the benefit, it is paid to a designated beneficiary or the estate
- The balance in locked-in retirement accounts (LIRAs) and life income funds (LIFs) becomes unlocked at death and paid to the surviving spouse, or to the estate if the spouse declines it. Note that this amount is taxable, unless it is transferred to another pension plan
Public Pension Plans
The Canada Pension Plan (CPP) and the Quebec Pension Plan (QPP) provide benefits to the surviving spouse along similar lines. Broadly speaking, whether the annuity is paid by the CPP or the QPP will depend on if the deceased was living in Quebec or elsewhere in Canada at the time of death (or on the last province of residence if the deceased was living abroad).
- Surviving spouses from marriages, civil unions, and in some cases common-law unions, may be eligible for a monthly pension, generally until they themselves become eligible for a retirement pension at the age of 65
- The amount will depend on the surviving spouse's age and situation (ie, whether they have children or not, among other factors)
- These payments pass outside the estate and go directly to the surviving spouse, and cannot be transferred to the estate
Old Age Security
- Under the federal government's Old Age Security program, the surviving spouse may be eligible for an Allowance for the Survivor if certain criteria are met. For example, the surviving spouse must be aged 60-64 and live on a low income
- This income would be payable directly to the surviving spouse and cannot be transferred to the estate
Private Pension Plans
- Under a Defined Contribution or Defined Benefit Plan, if the plan member dies after retirement (ie, the plan member has already begun receiving a retirement pension under the plan), the spouse is entitled to a pension for the rest of his or her life. If the spouse declines the pension or if the deceased has no surviving spouse, the estate may be eligible for a payment -- all depending on the options the deceased selected with the plan
Annuity with a Guarantee Period
- Annuity payments end upon the death of the annuitant unless there was a guarantee period, in which case payments will continue until the end of the guarantee period and will be payable to the estate or for the benefit of the spouse, depending on the contract. If the annuities are payable to the estate, the executor can decide to continue to receive the annuities or take a commuted lump sum. This decision should be taken based on the circumstances and needs of the estate, the interest of the beneficiaries, and whether or not there is a testamentary trust.