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Did you know that you cannot pass on your Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF) holdings tax-free to your heirs? Once the second spouse dies, all monies in an RRSP or RRIF are taxable as income in your final tax return unless there are dependent children.
An eligible individual is a child or grandchild of a deceased annuitant under an RRSP or RRIF, or of a deceased member of a Registered Pension Plan (RPP) or a Specified Pension Plan (SPP) or Pooled Registered Pension Plan (PRPP), who was financially dependent on the deceased for support, at the time of the deceased’s death, because of an impairment in physical or mental functions. The eligible individual must also be the beneficiary under the Register Disability Savings Plan (RDSP), into which the eligible proceeds will be paid. 1
In most cases, significant tax may be due, depending on your marginal tax rate and final calculations in your estate. Consider talking to your advisor about buying a joint last-to-die life insurance policy timed to pay after you and your spouse die. It can equate to a small percentage of your RRSP/RRIF holdings per year to make up for the taxes due on what has become, for some, a small fortune.
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Life Insurance and Segregated Funds Disclaimer
Life Insurance policies vary according to contract terms. Please read any
Life Insurance policy contract provided, or the segregated fund summary
information folder prospectus before the time of purchase. Full details of
coverage, including limitations and exclusions that apply, are set out in
the policy of insurance. Commissions, trailing commissions, management fees
and expenses may be associated with segregated fund investments which may
not be guaranteed and their market value changes daily and past performance
is not indicative of future results. A description of the key features of a
life insurance policy, a segregated fund; and any applicable individual
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