Gift of RRSP or RRIF

 

Under normal circumstances, the funds remaining in your RRSP or RRIF at death are included in your taxable income in the final year of life, unless you transfer them to your spouse. This means that your estate will have to pay the income tax on all the funds remaining in your RRSP or RRIF and only the after-tax amount will be available to be transferred to your intended beneficiaries. You can reduce the amount of tax payable by your estate by designating a registered charity, such as Ecojustice Canada Society, as a beneficiary of your RRSP or RRIF. 

 

Ms. Bird died on August 1, 2010. Her net income at death, not including her RRSP, was $200,000. She had no spouse and owned an RRSP valued at $150,000. The following illustration shows the difference in tax payable by Ms. Bird’s estate depending on whether or not she had designated Ecojustice Canada Society as the beneficiary of her RRSP.

 

 

	No Designation	Ecojustice Canada Society as designated beneficiary
Ordinary income	$200,000	$200,000
RRSP income	$150,000	$150,000
Taxable income	$350,000	$350,000
Donation tax credit	n/a	($67,500)
Tax payable at 45%	$157,000	$90,000
Estate retains	$192,500	$110,000
Charity (Ecojustice) receives	0	$150,000
Total to estate and Ecojustice	$192,500	$260,000

 

 

In the above example, through her RRSP designation, Ms. Bird ensured that her estate saved $67,500 in income tax payable and, at the same time, contributed $150,000 to Ecojustice Canada Society. 

 

Through a designation of your RRSP or RRIF funds to a registered charity, like Ecojustice Canada Society, your estate will realize savings not only in income tax but also in probate tax payable. To get the best plan for you, we recommend that you consult your tax and financial advisors before finalizing your estate plan. 

 

When considering whether to designate a charity, such as Ecojustice Canada Society, as the beneficiary of your RRSP or RRIF, you may wish to think about and discuss the following with your financial advisor: 

 

• The value of your RRSP or RRIF; 
• Whether you would like your spouse to benefit from your RRSP or RRIF after your death; 

• The value of your other assets; 

• Whether it would be beneficial for you to directly designate the charity as the beneficiary of your RRSP or RRIF to avoid having your RRSP or RRIF proceeds flow into your estate; 
• The portion of your estate that you would like to donate to a charity in light of the tax benefits of making the gift; 

• The correct legal name of the charity you have chosen. 

 

Designating a charity, such as Ecojustice Canada Society, as the beneficiary of your RRSP or RRIF is easy. Simply contact the financial institution holding your RRSP or RRIF and ask for a beneficiary designation form. Staff at Ecojustice can help you complete the beneficiary designation form to ensure that your wishes can be carried out. Your gift will contribute to protecting biodiversity, healthy oceans, clean air and water, and combatting climate change into the future. 

 

 

Jocelyn Anderson
Philanthropy Coordinator
Ecojustice Canada Society
214 – 131 Water Street, Vancouver, BC V6B 4M3
Phone: 604.685.5618 ext 293
Fax: 604.685.7813
Toll free: 1.800.926.7744 ext 293
Email: janderson@ecojustice.ca