THUNDER BAY – Financial Planning – When many of us make RRSP contributions the first thought that comes to mind is immediate tax savings but estate planning strategies are also important for these plans. Upon death, RRSPs are fully taxable at their fair market value so without the proper steps we could significantly lower the amount our heirs will receive from our plans. It wouldn’t take much in RRSP savings to trigger the top tax bracket which is why these proper steps will help you shelter your savings.
When setting up an RRSP you can designate a beneficiary to your plan. Without a set beneficiary, the assets will go through your estate and could be subject to probate fees.
Leave it to your spouse or common-law partner
This will allow you to defer the taxes as a spouse or common-law partner can simply roll the RRSP or RRIF into their own registered plan without any immediate tax consequences. This will allow you to control the amount you withdraw and do the proper planning to avoid a large tax bill.
Use life insurance to protect your RRSP
A common strategy is to use life insurance to protect your RRSP from taxes upon death. Set up the policy with a designated beneficiary to whom you’d like to leave the money to. This strategy allows you leave an amount equal to what your taxes would be upon death. The cost to protect your RRSPs in this case is just the insurance premiums.
The Bottom Line
The proper planning doesn’t need to be difficult but should be done. The benefit of RRSPs is to defer taxes for a later date, but that doesn’t protect you from taxes upon death. Following these steps will ensure that you are maximizing your RRSPs value should it need to be left to your heirs. If you would like any further information on protecting your wealth from taxes, do not hesitate to contact me directly.
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Anthony M. Talarico
Financial Security & Investment Representative
W: 807-343-4788 ext. 4248 C: 807-472-6092