Retirement Planning RRSP and RRIF : Tax tips
Home Buyers Plan
If you are thinking of buying a house, you should be aware that the Home Buyers Plan allows qualified taxpayers to use up to $20,000 from their RRSP when buying a home. To qualify, neither you nor your spouse may have owned a home in the last five years.
Spousal RRSP contribution
If you make a spousal RRSP contribtion instead of a regular one, the that funds you contribute may be safe from attack by future creditors.
Own company and you are retiring?
If you own your own company and you are retiring to leave it for others to carry on, you can arrange for the company to pay you a reasonable retiring allowance which will be deductible to the company, and you may be able to transfer all or a portion of the allowance to your RRSP and claim the tax deduction.
Repayable income tax-free RRSP withdrawals
Repayable income tax-free RRSP withdrawals can now finance full-time training or education for a taxpayer or spouse. Students in full-time training or post-secondary education or their spouses may withdraw up to $10,000 per year from their RRSPs over a four-year period, as long as the total amount does not exceed $20,000. The amount withdrawn from the RRSP must be repaid in equal instalments over 10 years or it will be included in income for Canadian income tax purposes.
RRSP when turn 71
If you turn 71 this year you'll have to decide what to do with your RRSP before the end of this year. If you wish to have some control over the investments, you should purchase a registered retirement income fund (RRIF). If you'd rather have a steady monthly income, consider purchasing an annuity.
The use of spousal RRSPs during working years
The use of spousal RRSPs during working years permits the higher income spouse to get the tax benefit of the RRSP income tax deduction, while incurring tax on a lower income when the amounts are withdrawn on retirement.
Taxation of Same sex couples
Starting with the 2001 tax year, same sex couples can make spousal RRSP contributions for Canadian income tax purposes and can make tax free RRSP rollovers in the same way that opposite sex couples can.
Losses incurred in an RRSP
Losses incurred in an RRSP cannot be deducted against other income for Canadian Income Tax purposes.
RRSPs to be exempt from seizure
Under the recent amendments to the Bankruptcy and Insolvency Act, RRSPs are exempt from seizure, with no upper limit. There will however be a 1 year clawback.
Registered Retirement Savings Plan (RRSP)
Under recent amendments to the Canadian Income Tax Act, a Registered Retirement Savings Plan (RRSP) can now be kept until the end of the year in which you turn 71, rather than 69 as was previously the law.
RRSP and RRIF
Once you reach the age of 50 start thinking about withdrawing funds from your RRSP using a RRIF meltdown strategy, which offsets the tax inclusion from the RRIF withdrawal with an equal amount of deductible interest.
Proceeds of an RRSP
The Ontario Court of Appeal, in Amherst Crane Rentals Ltd. v. Perring, (2004) D.T.C. 6584 has ruled that in certain circumstances proceeds of an RRSP are excluded from the estate of an owner and therefore protected from the creditor’s estate.
Life Insurance RRSP
RRSP’s are normally available to be seized by your creditors in satisfaction of your debts. If liability issues are of concern to you consider a life insurance RRSP which is exempt from seizure by your creditors
RRSP
In the case of Perring the Ontario Court of Appeal held that RRSPs do not form part of the estate of a deceased but instead devolve directly to the designated beneficiary and that a creditor has no recourse to repayment from the RRSP proceeds in the designated beneficiary’s hands when the estate cannot pay its debts. There has been a divergence of judicial opinion on the issue between Ontario and other provinces. RRSPs in Ontario are now treated in the same way as the proceeds of a life insurance policy, that is to say they both devolve directly to the designated beneficiary, not via the estate, and are thereby beyond the reach of creditors.