Here is a quick summary of the Benefits of a ScotiaMcLeod Spousal RRSP
Contributing to a spousal RRSP is an income-splitting technique that lets you reduce your taxes,
both now and when you retire. Even with the pending changes which allow spouses to split retirement pension income
including RRSP/RRIF income after age 65, spousal RRSPs will still make sense if your spouse will be in a lower tax
bracket than you at retirement (e.g. if you have a pension or significantly higher RRSP balances). Spousal RRSPs
will still allow income splitting prior to age 65, RRSP contributions for individuals over 69 (who have a younger
spouse) and greater homebuyers withdrawal options.
Here are some of the benefits:
- You receive an immediate tax break for your contributions to the spousal RRSP. Your contributions
are deducted from your overall contribution limit.
- The RRSP is in your spouse's name (as annuitant) so
at retirement, your spouse can withdraw the funds at his or her lower tax
bracket.
- You can combine your spouse's regular RRSP contributions and your Spousal RRSP contributions in the same
account under your spouse's name, to simplify administration and save on fees. However, the entire account is
considered spousal, and your spouse would need to wait 3 years from your last ever spousal contribution to make a
withdrawal. Otherwise, attribution rules say that any withdrawal from the account is considered spousal. (Please
consult us to discuss the pros and cons of co-mingling a spousal and regular RRSP). Minimum withdrawals prior to
the 3 year attribution period are allowed from a spousal RRIF.
- Because of the 3 year attribution rules on withdrawals from spousal RRSPs described in #3, it is better to
make spousal contributions before Dec. 31 each year. A contribution must stay in the spousal RRSP for three
calendar years before it is withdrawn, or the withdrawal will be attributed back to the contributor. Under
this rule, if your contribution to the spousal RRSP is made in the normal January or February period, your
spouse has to wait a year longer (to avoid having the withdrawal attributed back to the contributor) than if
it had been made in December.
- You should be aware that you cannot transfer from your RRSP to your spouse's RRSP. The
decision needs to be made each year when you contribute. As a general rule, you can wait until you are around
45-50, at which point your and your spouse's retirement income will be more predictable, and still have many years
to fund the spousal RRSP if required.
To set up a spousal RRSP, simply indicate your spouse's
name on the application form, with you
listed as the spousal contributor.
Please contact us to discuss your personal situation.
More on spousal RRSPs
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