Toronto Escorts

Getting Inheritance Out of RRSPs?

Keebler Elf

The Original Elf
Aug 31, 2001
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The Keebler Factory
If a widowed parent has a lot of cash in RRSPs (say in the 6-figures) and wants to get the money to the kids before he/she dies, what's the best way to go about it?

If the money is all withdrawn at once (or if the RRSPs are liquidated upon death), taxes will eat up half of it. Is there any other clever forms of getting access to the money? Perhaps using it to buy a house and then gifting the house? Something like that?
 
B

burt-oh-my!

The problem is that the withdrawal will be taxable no matter what, unless it is a transfer to a spouse on death. You can OFFSET the tax, but in essence that is a separate transaction, with risks all its own.

I can only think of two strategies: small withdrawals to keep the tax rate low, or withdrawing it all then investing in a Resource Limited Partnership to offset the tax. This might take a year or two to complete because you will still be hit with withholding taxes, so you will need to invest what proceeds you have in a LP same year, then use the tax refund next year to invest in more LP, etc.

Problem is of course that LPs tend to not be great investments.

Your house idea has no merit, won't affect the tax situation at all.

Ultimately, the government gave a tax deferral on inception of the RRSP - now they want it back, and they will get it.

Oh yes, final option: marry them.
 

chuckparker

Member
Mar 25, 2006
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Once it is in the RRSP you will be paying tax on it when it is withdrawn. I don't believe there is a way to get around it.
 

pmoc

New member
May 12, 2008
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There are a multitude of strategies that can be employed. Some more tax efficient than others. Insurance is a prime tool in this case.
 

duang

Active member
Apr 17, 2007
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If a widowed parent has a lot of cash in RRSPs (say in the 6-figures) and wants to get the money to the kids before he/she dies, what's the best way to go about it?

If the money is all withdrawn at once (or if the RRSPs are liquidated upon death), taxes will eat up half of it. Is there any other clever forms of getting access to the money? Perhaps using it to buy a house and then gifting the house? Something like that?
If the parent is insurable then you can offset the potential tax loss on collapsing the RSP by buying life insurance to cover the tax bill.

Some people also use the tax savings from flow through shares or leveraging [aka Smith Manoeuver and writing off the interest expense] to offset the tax bills from melting down the RSP but each of those strategies exposes you to the risk of the underlying investments creating the tax deductions.

D.
 
Ashley Madison
Toronto Escorts