Deceased participated in the Home Buyers' Plan (HBP)
General rule – If an HBP participant dies, the legal representative has to include the participant's HBP balance in the participant's income for the year of death.
The amount to be included in a deceased participant's income for the year of death is equal to the participant's HBP balance before death less any RRSP contributions (made before the participant died) designated as an HBP repayment for the year of death.
Example
John dies in 2023. At the time of death, his HBP balance was $7,000. He had made a $1,000 RRSP contribution before he died, which he intended to designate as an HBP repayment for 2023. John's legal representative has to include $6,000 ($7,000 - $1,000) as RRSP income on line 12900 of John's final income tax and benefit return for 2023.
HBP election
If, at the time of death, the participant had a spouse or common-law partner who is a resident of Canada, that individual can jointly elect with the deceased participant's legal representative, to make the repayments under the HBP. By doing so, the income inclusion rule will not apply for the deceased participant. The participant's HBP balance at the time of death less any RRSP contributions designated as an HBP repayment for the year of death is treated as if the surviving spouse or common-law partner withdrew it, and it has to be repaid to that individual's RRSPs.
Note
Before the participant dies, the surviving spouse or common-law partner may have also become a participant in the HBP. There are no adverse tax consequences to the surviving spouse or common-law partner if, as a result of electing to treat the deceased participant's HBP balance as their own, the new HBP balance exceeds $35,000.
If at the time of death the participant's surviving spouse or common-law partner is also a participant and the election described above is made, the surviving spouse's or common-law partner's revised HBP balance has to be repaid over the remaining number of years in their repayment period.
However, if the surviving spouse or common-law partner was not a participant, the deceased participant's HBP balance has to be repaid over the same number of years remaining in the participation period of the deceased.
To make a joint election, the surviving spouse or common-law partner and the deceased participant's legal representative must attach a signed letter to the final tax return of the deceased. The letter must state that an election is being made to have the surviving spouse or common-law partner continue making repayments under the HBP, and to not have the income inclusion rule apply for the deceased participant.
Generally, if the surviving spouse or common-law partner was not participating in the HBP but elects to continue making the repayments of the deceased individual, the surviving spouse or common-law partner would be considered a participant and cannot make any withdrawals under the HBP until the HBP balance is completely repaid and all the other applicable HBP conditions are met.
Note
If the deceased participant had not made an HBP repayment for the year of death, and the election is made, the minimum required repayment for that year for the deceased's participation would not be required. The surviving spouse or common-law partner would continue to make the minimum required repayments in the subsequent year
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