What is the spousal rollover in Canada?
The spousal rollover lets you transfer capital property and registered plans (RRSP/RRIF) to a surviving spouse or common-law partner at your adjusted cost base rather than fair market value. This defers the capital gains and registered-plan tax that would otherwise be triggered by the deemed disposition at death, until the survivor eventually sells or dies.
Does the spousal rollover eliminate tax or just defer it?
It defers the tax, it does not eliminate it. The surviving spouse inherits your cost base and will be taxed on the full accrued gain when they later sell the asset or on their own death. Careful planning can still reduce the overall tax over both lifetimes, but the liability is not erased.
Can the rollover apply to a spousal trust?
Yes. A qualifying spousal or common-law partner trust that gives the surviving spouse exclusive rights to income (and no one else access to capital during their life) also qualifies for the rollover. This is common in blended-family planning to provide for a spouse while preserving capital for children from a prior relationship.
Can I choose not to use the rollover?
Yes. The executor can elect out of the rollover on specific assets, realizing the gain on the deceased's final return. This is useful when the deceased has unused capital losses, the lifetime capital gains exemption, or is in a low bracket, so the gain is taxed cheaply now to bump up the survivor's cost base.