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Tuesday, February 22, 2011

Avoid RRSP tax with a proper beneficiary

This article from the Globe and Mail does a particularly good job of explaining the error that many parents make when leaving their estates among their children. The mistake I'm referring to is forgetting or not understanding who is paying the tax on their RRSP or RRIF when they pass away. Click here to read the article.

7 comments:

  1. Great find on the article. Many people with RRSPs or estates need to know (and calculate) what exactly they're handing off to their later generations. It could definitely cause some issues to arise if not settled properly. Frightening story mentioned in the article too.

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  2. I am soo lucky to have found your blog! It's amazing!
    My question is:What's considered estate?
    I am the beneficiary of my dad's RRSP, and I received the entire sum (to my surprise, then I read your blog, and it now makes sense).
    Are these moneys considered part of the estate?
    Also I was the beneficiary of his life insurance. Is that part of the estate?
    Thank you.

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    Replies
    1. Hi, I'm glad you enjoy my blog.

      No asset that directly names a beneficiary is considered part of the estate. So in your case, neither the RRSP nor the life insurance policy should be in the estate.

      Lynne

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    2. My father passed away without a will. The house that my parents lived in is in both their names. How much of the property, if any, is part of the estate?
      Thank you.

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    3. I'm assuming that "in both their names" means that they were joint tenants with right of survivorship. I'm assuming that simply because it's by far the most common arrangement for married couples.

      As for what falls into the estate, that depends on whether your mother is still alive. If so, she now owns the whole house and none of it falls into the estate.

      On the other hand, if your mother passed away before your father did, then the whole house is in the estate.

      Lynne

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    4. Hi again.
      The property documents are in both their names, my mom and my dad. What are the legal steps my mom needs to take to ensure that the property is legally hers? In other countries there are documents that need to be filled for the property to be transferred. Is that the case in Ontario as well?

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  3. my common law wife and i separted 6 years ago--she now lives in england and collects can. oap and cpp--we both have rrsps with a bank in bc---i have elected her as beneficiary to my rrsp as well as the cash acount in both our names--we have not stated we are separated--my question -is she a qualified beneficiary for tax free transfer of my rrsp to her rsp at our common bank institution in bc. upon my death

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