Like most Canadians you have probably made annual contribution to your Registered Retired Savings Plan, commonly known as an RRSP. Your contributions are tax-deductible, the funds accumulate tax free for a RRIF or an annuity and, on death, you can transfer the income tax-free to your surviving spouse. Every retirement plan therefore, should take full advantage of the fully deductible RRSP contributions.
However, did you know that your heirs could stand to lose up to half of this money to the taxman?
When the surviving spouse dies, your children or grandchildren who would normally be heir to any funds or payments remaining in RRSPs or Registered Retirement Income Fund, stand to lose up to half of these funds to taxes.
To avoid this loss, you and your spouse can take a joint last-to-die policy which will pay out the proceeds, tax free, to your children and grandchildren. This way you ensure that none of the money you saved in your RRSP during your lifetime will be wasted. The amount of the policy can be for an affordable premium.