Dealing With Your RRSP:  Plan Now For Your RRSP Tax Liability

Most of us take our RRSPs (and our RRIFS) for granted. While these plans are the foundation of any sound retirement saving strategy, they do have drawbacks.

Principal among them is the taxation of RRSP/RRIF assets upon death. Money contributed to an RRSP created tax deductions during your life. But those deductions were only a deferral of taxes. Upon your death, Canada Customs and Revenue Agency will want its share. Of course, you could transfer your RRSP/RRIF assets to a spouse, dependent child or grandchild (such transfers are tax- free). But if your spouse predeceases you, and if you have no dependent children or grandchildren, you could send nearly half of your RRSP/RRIF to Ottawa.

Fortunately, there are things you can do to prevent this from happening. The following are two suggestions:

estate planning an insurance strategy is instituted to offset taxes owed to the government and put them in the hands of your beneficiaries. Yes, we do deal with insurance (through BMO NB Financial Services).

charitable gift Donating an RRSP to charity will generate a charitable receipt for the estate, which may be used to offset taxes. Structure such a gift outside the will and the assets won't have to pass through probate, saving even more. Sounds interesting? Ask us to set up a consultation with a professional tax consultant.

Here To Help You

No, you can't avoid taxes forever. But you can minimize them. Our Pathfinder retirement analysis program can help estimate your expected RRSP/RRIF tax liability, and show you how to overcome it. Phone me today for more details.