The Canada Pension Plan (CPP) Death Benefit is a one-time, lump-sum payment made to the estate on behalf of a deceased CPP contributor. The maximum amount provided is $2,500 and is taxable to the Estate.
Typically it is the Estate Trustee that applies for the CPP Death Benefit, but if there is no Will, the person to apply for the CPP Death Benefit would be the person who covered the funeral expenses, the surviving spouse or the next-of-kin of the Deceased.
The Government of Canada has specific eligibility requirements for the CPP Death Benefit, and an application for the benefit may not be approved if these requirements are not met.
The specific requirements are as follows:
- The Deceased must have contributed to the CPP for a minimum of three years; and
If the Deceased contributed to CPP for longer than nine years, they must have contributed in one of the following, whichever is less:
- 1/3 of the calendar years in their contributory period, or
- 10 calendar years
It is important to remember that mandatory CPP contributions came into force in January, 1966. Some estates may not be eligible for the CPP Death Benefit depending on when the deceased was born, as it may not have been available for them to contribute to for a long enough period prior to their retirement.
Also, if you are the Estate Trustee of someone who was the surviving spouse of another Deceased, even though that person may have been receiving CPP prior to their death, they may not have contributed to CPP themselves. They may have been receiving their predeceased spouse's CPP benefits, in which case, their estate will not be eligible for the CPP Death Benefit.
It is important to ensure that you apply for the CPP Death Benefit within six months after a Deceased has passed away, and always get confirmation from the Government regarding whether or not the Deceased is eligible for the CPP Death Benefit.