For many of us, one of biggest vehicles for savings for our retirement is RRSPs and possibly RRIFs. Oftentimes, these investments form a big part of our estate. So, we want to make sure that these assets are considered appropriately when you’re estate planning.
You must designate a beneficiary for your RRSP and RRIF. If you don’t, there can be serious tax consequences when you die. All funds would be put into your estate and it would be taxed as income received at the date of your death. Having a properly planned will, will help defer or transfer these type of tax liabilities. For example, by designating your spouse as a beneficiary, your spouse can roll over the funds in your RRSP.
In some cases, it may be best for your spouse to not roll over the funds. When does this make sense? Well, it depends on your situation. Give us a call, and we can assess what is the best tax planning strategy for you. Nevertheless, naming your spouse as a beneficiary in your will gives your spouse options to work with. Your spouse will also have to contact an expert at the time of your passing to see what option makes the most sense for them given their particular situation.
If you decide to name a beneficiary to your RRSP or RRIF who is not your spouse, there are tax issues that you need to consider. In this case, there would be no spousal rollover option and the taxes would have to be paid. This means you should clearly outline in your will how the taxes are to be paid. If you don’t, your estate can be forced to pay the taxes if the beneficiary refuses to pay for them.
The money we save and put away in our RRSPs and RRIFs is hard-earned! We don’t want to fall prey to tax consequences that could have been avoided. Call us now to discuss how best to structure your will and plan your estate in the most favourable way to your estate and your beneficiaries.