Hello;
One of the tax breaks the government gives to couples takes place when the first spouse passes away. That person’s RRIF can be taken over by the surviving spouse without taxes being payable at the time. So those funds continue to grow on a tax-deferred basis.
What happens when the surviving spouse passes? CRA calculates your taxes owing as if you sold all your assets at the moment of your death. As such, the RRIF is treated as income in the year you pass. This can push people into the highest tax brackets. In Ontario, 53.53% of all that income will make its way to CRA! That leaves a lot less for heirs.
A Joint-Last-to-die (JLTD) life insurance policy is designed for couples and only pays out the insurance proceeds upon the passing of the second spouse. This type of plan is typically used to help offset taxes payable by the estate. The timing of the tax-free insurance pay-out meets the tax need. A couple would purchase a JLTD policy when they recognize their estate will face a sizable tax liability.
There are various ways to minimize the effect of taxation on estate assets. We work with clients to chart a course to determine which strategy best suits each client’s situation.
For more information, please let us know if you require further information.
Mike Busby (23-Jan-23)
THE COMMENTS CONTAINED HEREIN ARE A GENERAL DISCUSSION OF CERTAIN ISSUES INTENDED AS GENERAL INFORMATION ONLY AND SHOULD NOT BE RELIED UPON AS TAX OR LEGAL ADVICE. PLEASE OBTAIN INDEPENDENT PROFESSIONAL ADVICE, IN THE CONTEXT OF YOUR PARTICULAR CIRCUMSTANCES. THIS ARTICLE WAS WRITTEN, DESIGNED AND PRODUCED BY MIKE BUSBY FOR THE BENEFIT OF MIKE BUSBY WHO IS A FINANACIAL ADVISOR FOR BRANDON LINDSAY INSURANCE AGENCIES, A TRADE NAME REGISTERED WITH INVESTIA FINANCIAL SERVICES INC., AND DOES NOT NECESSARILY REFLECT THE OPINION OF INVESTIA. THE INFORMATION CONTAINED IN THIS ARTICLE COMES FROM SOURCES WE BELIEVE RELIABLE, BUT WE CANNOT GUARANTEE ITS ACCURACY OR RELIABILTY. THE OPINIONS EXPRESSED ARE BASED ON AN ANALYSIS AND INTERPRETATION DATING FROM THE DATE OF PUBLICATION AND ARE SUBJECT TO CHANGE WITHOUT NOTICE. FURTHERMORE, THEY DO NOT CONSTITUTE AN OFFER OR SOLICITATION TO BUY OR SELL ANY SECURITIES. MUTUAL FUNDS OFFERED THROUGH INVESTIA FINANCIAL SERVICES INC.
