RRSPs and RRIFs are among the most heavily taxed assets.
If a surviving spouse is named as a beneficiary in your RRSP or RRIF, the accounts are transferred tax free. If there is no surviving spouse, the accounts are deemed sold and 100% of the balance is added to your income for the tax year of your passing. This makes your estate responsible for the tax on this income.
However, tax credits for up to 100% of your income can be claimed in the year of your passing— plus up to 75% of your income for the next five years—so it often makes sense to name a charity like CLWR as the beneficiary.
This is a great thing to do because:
- the tax credit from the donation can be applied against your remaining state income tax
- the donation is not subject to probate fees
- you can change the beneficiary at any time
- the are no fees
