Giving RRSPs and RRIFs

The tax advantages of investing in registered investment accounts over the last few decades have resulted in most Canadians accumulating significant assets in their RRSP's and RRIF's (Registered Retirement Plans).

Most commonly, spouses name each other as beneficiary of registered plans since CRA allows these assets to transfer to the surviving spouse without tax implications.

At the death of the last spouse however, all RRSP and RRIF accounts are deemed to be sold. The result is that the value of these accounts is added to the income of the deceased in the year of death. As a result of this one-time income event, it's possible that almost 50% of the value could be lost to taxes.

Thankfully, all is not lost and there is an option available to you. Since Canadians are allowed to give away 100% of their income in the year of death, this additional RRSP/RRIF income offers an excellent opportunity for generous giving. Gifting 100% of RRSP/RRIF accounts can completely eliminate the tax bill resulting from this income through the tax credit generated by the donation receipts received.

How it works:

A. In the case of two living spouses, Provident Foundation could be named the contingent beneficiary of registered accounts so that in the event of a common disaster, the funds would be donated to Provident for distribution to charities of the donor’s choice.

B. In the case of one remaining spouse or a single individual, naming Provident Foundation as the beneficiary of your registered retirement plan means a donation will be made in the year of death equal to the disposition value of these accounts. Since the income of the deceased has been increased by the same value, the resulting tax credit can be claimed entirely in the year of death, completely offsetting the tax burden caused by the disposition of the registered account.

  1. Contact your financial advisor or the holder of your RRSP or RRIF investments to change the beneficiary on your account. Name Provident Foundation as the primary beneficiary if you wish to donate the entire account at your death. Name Provident as the secondary beneficiary if you have a surviving spouse at this time.
  2. In order to leave your recommendations on the distribution of these monies to charities of your choice once they are received by Provident, simply complete a Letter of Direction and send it to Provident.
  3. Alternatively, if you would like your gift to be used to establish a Provident Legacy Fund, complete the appropriate Legacy Fund application form and send it to us. Be sure to include the contact information of your fund successors.
  4. Advise your family and your financial advisor of your decision.