Justice VA Miller agreed with CRA. Had the children disclaimed their rights in the RSP, it would automatically have vested in the estate, which could then elect with the wife to have the RSP treated as having been paid to the wife on death. (See ITA s. 146(8.1).) If so, the amount could qualify as a non-taxable “refund of premiums” under 146 (1) and 146 (8.9). But the children did not disclaim; they transferred an interest they had accepted.
Paragraph 31 is the key:
" Unlike the factual situation in Hillis, the designated beneficiaries in the present case did not disclaim their rights to the RRSP in question. Paragraph 2 of the Consent Order states that “the Murphys agree to sign all required documents to release, convey and transfer to and in favor of the Applicant any and all interests that they may have in registered retirement savings plans of their father…” [my emphasis added]. This wording suggests to me that the Murphy Children assigned their interests in the RRSP. I interpret this wording to mean that they accepted the gift of the proceeds of the RRSP and then after negotiation and settlement, they consented to transfer all of their interests to Ms. DeMarsh. This is not a disclaimer but an assignment."
See also ¶34:
" It is my view that at the time of Mr. Murphy’s death, the subject RRSP devolved directly to the Murphy Children who were the designated beneficiaries. They did not disclaim their interest in the RRSP but assigned their interest to Ms. DeMarsh by way of the Consent Order. The Consent Order was not a rectification order."
Murphy Estate v. The Queen 2015 TCC 8 (VA Miller)