I believe you can do just what you are trying to do but I am having some difficulty finding the CRA rule, and more importantly, the form where you do it. I think this form may do the job for you: T1090
This form provides information for individuals on the Designated Benefit as a result of the death of a RRIF Annuitant.
www.canada.ca
It appears to allow you to divide the amounts of the RRIF between the two annuitants as long as one is a qualifying survivor, which a spouse is. You would just divide up your BILs RRIF between the two, as you would like it and sign the form in both spots as executor to both. That said, I am not familiar enough with all the boxes of the T4RIF that gets issued by the FI to be sure. Perhaps this info can be helpful and may shed light on the situation. RC4178
This Canada Revenue Agency (CRA) information sheet provides general information for individuals on the death of a Registered Retirement Income Fund (RRIF) annuitant.
www.canada.ca
Obviously the taxes on your sister's RRIF has to go on her final tax return since she did not have a qualifying survivor (spouse) when she died.
Also keep in mind, that I have noticed in life, as both a personal tax payor and an executor that for us living tax payors, not declaring income precisely as it is recorded on a T-slip can be a major problem, but not declaring income as it is recorded on a T-slip for a deceased person is just another day at the office for CRA. They don't seem to care and I think they must see this all the time. So don't worry as much that your declaration of income, on a tax return, is not precisely as stated on a t-slip. Of course it never hurts to include a letter explaining what you have done. Actually that is probably essential. Good luck.
