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RRSPs, RRIFs, and Spousal Rollover

Apr 23, 2019 9:00:00 AM The MacMillan Estate Planning Team RRSP, RRIF, spousal rollover


Plenty of opportunities exist to make financial strategy and estate planning more rewarding for you and your spouse. The trick lies in identifying them and leveraging them effectively. RRSP and RRIF accounts have certain advantages that you and your better half should be aware of.

Tax Benefits for the Surviving Spouse

A primary concern during the settling of an estate is contending with tax. In Canada, retirement accounts such as RRSPs and RRIFs are taxed as income. However, if a spouse is designated as the beneficiary of the account, it is possible for the funds in a registered account  to be transferred to the RRSP or RRIF account of the surviving spouse on a tax deferred basis.

For non-registered accounts and assets, a deceased individual is deemed to have disposed of his or her assets at fair market value. Capital gains tax applies to any increase in value. Non-registered assets, which would otherwise be deemed to have been disposed of and taxed accordingly if there are gains, may be transferred to a spouse without the imposition of capital gains tax. This is often referred to as spousal rollover. With a properly executed rollover, the funds will not be subject to capital gains tax until  the death of the surviving spouse. Further tax deferred growth can greatly enhance the value of the estate.

Key Considerations

To successfully take advantage of this tax deferral for registered accounts, a number of requirements will need to be met. The transfer between registered accounts must take place before December 31st of the year following the year of the original annuitant’s death. The surviving spouse must then include the funds in his or her tax return to finally claim the offsetting deduction. Ideally, the surviving spouse will be named as the sole beneficiary within the account. If your spouse named you as a beneficiary in the will but not the account documentation, your family office may still be able to help you secure a tax-deferred transfer.

Additional Strategies

Of course, not all advantages of a tax-deferred retirement account require the death of a spouse. If the necessary qualifications are met, spousal RRSPs can be used for income splitting, for instance. This is quite useful when one spouse earns less income than the other. If the higher-earning spouse contributes to the RRSP of the spouse within a lower marginal tax rate, the couple will ultimately benefit from a minimized tax burden overall upon withdrawal. This will count towards the deduction limit of the higher-earning spouse, but not the other. Ask your family office to help you implement this and other spousal retirement account strategies.

At the heart of a flourishing family lies a strong and prosperous union. When you need to provide for both one other and the rest of your loved ones, building a powerful estate takes the right expertise. Our family office has this and more. Call us at 1 (833) 266-6464 to get started!

At MacMillan Estate Planning, our team of professional trust and estate practitioners, chartered accountants, financial planners, and legal professionals look forward to assisting you with the design of your estate plan and will ensure you build, protect, and enjoy your wealth. The information provided is general and may not be suited to your objectives or sufficient to ensure the protection of you and your family. You should not act on this information without providing MacMillan Estate Planning with the opportunity to ensure that it is suitable for your unique situation.

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