Ken Armstrong 
Insurance & Financial Services
Milton, Ontario  905-878-0951

This strategy may apply to you if you have substantial funds in your Registered Retirement Savings Plan (RRSP) or Registered Retirement Income Fund (RRIF). Most Canadians are familiar with RRSPs but not with RRIFs. The difference between the two is simple — you save money over the years in RRSPs and you transfer those monies to RRIFs when you start taking the money out. You can take any amount of money out of your RRIF each year. However, because you pay income taxes on those withdrawals, the government does set a minimum which you must take out each year. (You can't defer taxes forever.) 

All funds in RRSPs and RRIFs are taxable on death unless those funds are transferred to a spouse or, in special cases, to a dependent disabled child. CCRA (Canadian Customs and Revenue Agency) allows this transfer on a tax-free basis. However, when the surviving spouse dies, children or grandchildren who would normally be heir to any funds remaining in RRSPs and RRIFs, stand to lose up to half of those funds in taxes. 

When the first spouse dies, his or her RRSP/RRIFs will pass tax-free to the survivor. However, when the second spouse dies, the taxes that must be paid in that year will be based on the second spouse's marginal tax rate. In this assumption we are assuming that  @ the time of the second death they still had $200,000 in their RRIF.  At death, their tax  rate will probably be very close to the highest marginal tax rate for the province where they live because all the RRSP/RRIF funds will be included in income for that year. In this case, it is assumed the survivor's highest marginal tax rate is 50%. Consequently, half of the total value of all his or her RRSP/RRIFs,  will be paid to CCRA in income taxes.

This example shows a joint last to die policy for Pierre & Carol, whereby they can guarantee their estate enough funds to pay the tax, or to learn how this tax liability of $100,000 could also be offset with a Charitable Donation!!!  So that Pierre & Carol can make a sizeable donation to their favourite charity and also leave their estate 100% of their RRSP's! contact an advisor

There are other interesting concepts  using  Universal Life please contact an advisor to learn more in detail.
 

Year	Monthly Deposit into account	Tax Free Dollars Required upon 2nd Death
1	142.50	$100,000
2	142.50	$100,000
3	142.50	$100.000
4	142.50	$100,000
5	142.50	$100,000
6 -10	142.50	$100,000
11-15	142.50	$100,000
16-20	142.50	$100,000
21-25	142.50	$100,000