Originally Posted by
ashedfc
RRSP account's (or RRIF's after 71yrs age), are all transferable to spouse, with no tax implications. Means, if one spouse passes away the, the entire proceeds are transfered to the surviving spouse without any tax bill. However, on the death of surviving spouse, all the Registered account proceeds passes through the ESTATE. Which means, all the proceeds becomes the income for the estate, & estate pays the income tax.
This is precisely because-
1. RRSP contribution receives the tax deduction.
2. RRSP or RRIF the account grows without paying any taxes.
3. RRSP or RRIF withdrawal - Taxes are paid every year on the amount of money actually withdrawn.
In reality, the amount in the RRSP or RRIF account had never paid taxes. That is why CRA, collects its tax money. After the tax bill is paid, all the trust of the money goes to the beneficiary (who-so-ever they happen to be).
In fact most of the cases we see, the Estate gets pushed in the highest tax rate, & the RRSP/RRIF accounts gets taxed at 46.41%.
But this happens only after the survivor spouse's death.
Hope this clarifies - in planning for estate rollover.
ASH