Direct Beneficiary Designation of RRSP or RRIF

If you are considering transferring your RRSP’s or RRIF via a direct beneficiary you should be aware of some of the negative consequences that can occur. But with a little bit of pre-PLANNING and preparedness, you can eliminate undesired outcomes.

Unintended Tax Consequences and What YOU Can Do:

  1. If you have designated a beneficiary on your RRSP or RRIF— the entire your value of it will be paid directly to that designated beneficiary. No tax will be withheld on the funds transferred, however the entire amount transferred will have to be reported on the terminal return. This means that although the funds have been transferred to a single beneficiary, the estate will have to pay taxes on that amount which ultimately reduces the amount of money being allocated to the estate’s remaining beneficiaries.
  2. RRSP’s can be transferred to qualified beneficiaries on a tax deferred basis as long as the RRSP or RRIF’s gets transferred to another RRSP or RRIF.

Qualified Beneficiaries Include:

  • Spouse
  • Common law spouse
  • Financially dependent child
  • Grandparent

Protect your loved ones with great estate planning and advice!

Treatment of Family Members

Often times, poor estate management results with increased tension amongst family members.

When determining the distribution of the estate’s assets you should consider what is left after taxes. The best way to ensure your estate is transferred effectively is to contact your accountant and financial planner to understand the tax treatment of your assets and have your will updated accordingly. Remember the goal of distributing your assets is to ensure the beneficiaries and family members continue to get along, as per your wishes.

Trevor Chopek is a Chartered Professional Accountant. You can find Trevor and his team helping small to medium sized business owners and individuals, just like YOU in Edmonton, Alberta. Book with Chopek & Associate* TODAY!

Ensure that your loved ones continue to get along with great estate planning!