Estate disputes are sometimes resolved through negotiated settlements that reallocate assets, entitlements, and tax obligations among beneficiaries. While these agreements are intended to bring finality, recent appellate guidance highlights a recurring risk in estate administration: settlement terms that shift tax liability without clearly defining how, when, and by whom those obligations must be fulfilled.

In Gersten Estate v. Weimer, 2026 SKCA 13, the Court of Appeal revived an estate’s claim against a beneficiary who had agreed to pay RRSP-related tax liability under a settlement, rejecting an early-stage limitation defence. The decision offers practical guidance for executors, trustees, and estate counsel across Canada on drafting, administering, and enforcing settlement agreements involving registered plans.

Who Pays RRSP Tax on Death, and Why It Often Falls on the Estate

From a practitioner’s perspective, RRSPs routinely create a disconnect between where the asset goes and where the resulting tax burden lands. Even when an RRSP designates a beneficiary and passes outside the estate, the income inclusion still appears on the deceased’s final return, leaving the estate to fund the tax unless a spousal rollover applies. This often means one beneficiary receives the full value of a registered asset while the estate, and, indirectly, the residual beneficiaries, absorb the tax cost.

This structural mismatch has real consequences for administration. Executors may face liquidity pressure when significant RRSPs trigger tax, but the estate holds insufficient cash to pay it. Residual beneficiaries may resent seeing their inheritance reduced to cover tax attributable to an asset they never received, while RRSP beneficiaries often believe they have no obligation to contribute unless a will or settlement explicitly requires it. These dynamics routinely influence settlement negotiations and can become a flashpoint in estates where registered assets form a large share of the wealth.

In practice, this is why parties frequently shift RRSP‑related tax obligations through negotiated agreements. Without clear provisions on timing, calculation, and enforcement, however, the inherent tension between the flow of the registered asset and the flow of the tax liability can easily resurface (often long after distributions have been made and when disputes are far more difficult to resolve).

Why Estate Settlements Commonly Shift RRSP Tax Liability to Beneficiaries

In practice, estate settlements address RRSP tax exposure by reallocating responsibility for payment between the estate and individual beneficiaries. These arrangements are often commercially sensible and allow disputes to be resolved efficiently.

However, settlements that shift tax liability must do more than state who will pay. They must also clearly define:

• When payment is due
• How the tax amount will be calculated
• What constitutes default
• How enforcement will occur if payment is delayed
• Whether payment is a condition precedent to asset distribution

Failure to address these issues can undermine the certainty that the settlement was intended to achieve.

What Happens When a Settlement Requires a Beneficiary to Pay RRSP Tax but Sets No Deadline

In Gersten Estate, competing claims among beneficiaries were resolved through a settlement under which one beneficiary would receive the RRSP proceeds, assume responsibility for the associated tax liability, and relinquish her residual claim against the estate. Although a court order confirmed the settlement and directed the transfer of the RRSP proceeds, neither the settlement agreement nor the order specified:

• a deadline for payment of the tax, or
• a mechanism for determining the amount owed.

After receiving the RRSP proceeds, the beneficiary requested confirmation of the tax liability so that payment could be made. That confirmation was not provided. When the estate later demanded payment and commenced an action, the beneficiary asserted that the claim was barred by the applicable limitation period.

When Does a Beneficiary’s Obligation to Pay RRSP Tax Actually Arise?

In Gersten Estate v. Weimer, the key issue wasn’t whether the beneficiary had agreed to cover the RRSP‑related tax (she had). Instead, the real problem was figuring out when her obligation actually took effect. The settlement and the court order said she was responsible for the tax, but they never explained when she had to pay it or how the exact amount would be determined. Because of that missing information, the Court of Appeal said it wasn’t obvious she had done anything wrong when the estate later demanded payment.

The idea is relatively simple: a person’s obligation doesn’t become enforceable just because the parties agree “you will pay the tax.” The obligation only becomes real (what courts call crystallized) once the important details are clear. That means the beneficiary must know how much is owed and when the payment is due. If those details aren’t spelled out, neither the estate nor the beneficiary can be certain when the clock starts running. This is why the limitation issue mattered so much. A limitation period usually begins when someone fails to do something they were required to do. But in this case, there was no clear deadline and no clear process for confirming the amount. Without those pieces in place, the court said it cannot be assumed the beneficiary was already late, and the case cannot be decided at an early stage by saying the estate waited too long.

In practical terms, the message is straightforward. If a settlement shifts RRSP tax liability to a beneficiary, the agreement must clearly set out when payment is due and how the amount will be established. Without that clarity, disputes later on become almost inevitable, and arguments about delay or default become very difficult to resolve.

What Executors and Trustees Should Do When a Settlement Assigns RRSP Tax Liability

Although Gersten Estate arises from Saskatchewan, the lessons extend well beyond provincial boundaries. Executors and estate advisors across Canada should consider the following when negotiating and implementing settlements involving RRSPs or other registered plans:

1. Draft settlement agreements with enforcement in mind: Settlement terms should clearly address timing, default, and remedies, not just entitlement.
2. Define how tax liability will be determined: Uncertainty around tax calculations can delay performance and complicate enforcement.
3. Treat settlement implementation as a critical phase of administration: Delays in confirming amounts or enforcing obligations can expose estates to unnecessary litigation risk.
4. Do not assume limitation defences will resolve ambiguity: Courts may be reluctant to permit beneficiaries to avoid agreed obligations where settlement terms left the triggering event unclear.

Why Clear RRSP Tax Provisions in Estate Settlements Matter in British Columbia

Estate settlements are intended to bring closure, reduce risk, and provide certainty. Gersten Estate v. Weimer serves as a reminder that achieving those goals requires not only careful negotiation but also precise drafting and proactive administration, particularly where tax liability associated with RRSPs or other registered plans is shifted to a beneficiary as part of a court-approved settlement.

For executors, trustees, and estate counsel, the decision reinforces a broader principle: clarity at the settlement stage is essential to avoiding disputes at the administration stage.