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PHILANTHROPIC GIVING
How RRSP/RRIF donations
can benefit your favourite
causes while saving taxes
for your estate KAREN SLEZAK, BBA, CPA, CA, CFP, TEP
It often comes as a big surprise to the family that the value of mom or dad’s Registered Retirement Savings Plan
(RRSP) or Registered Retirement Income Fund (RRIF) is fully taxable at the time of death. There are exceptions,
but only if the RRSP/RRIF passes to a surviving spouse or a minor child. When this isn’t the case, the value of the
RRSP/RRIF is reported on the parent’s final tax return along with income earned to the date of death and the
deemed sale of other property (e.g., stocks, bonds, real estate). All that income may push the tax rate into the
top tax bracket of 53.53% in Ontario. It can be quite disheartening for the family to lose more than half of mom
or dad’s carefully saved RRSP/RRIF in taxes!
I ask the children, “What if I could help you arrange your affairs so that you benefit your family and friends and
be philanthropic rather than supporting the Canada Revenue Agency?” So far, most individuals opt to structure
their legacies in ways that may benefit their family and chosen causes.
Two possible ways to gift your RRSP/RRIF to a charity:
1 Strategically liquidate your 2 Make your RRSP/RRIF gift after death.
RRSP/RRIF during your lifetime.
• This strategy involves drawing funds • Name the charity as the beneficiary of the registered
out of your registered plan and plan so the funds are paid directly to the charity.
gifting it to a charity during your
lifetime, allowing you to see how • On your final tax return, the value of the RRSP/RRIF is
your gift is used to benefit others. included in your taxable income. However, your estate
will receive a donation receipt for the same value.
• The withdrawals are taxable, but you
will get a matching donation receipt. • The donation may completely offset the tax or almost
The donation may completely offset offset it depending on your tax bracket.
the tax or almost offset it depending • If you wish to leave part of the RRSP/RRIF to a charity
on your tax bracket.
and part to family or friends, you will need to work
• Only withdraw amounts that will be with a lawyer to make the split designation in your will.
taxed in the lower and middle tax • In addition to fulfilling your charitable objectives,
brackets and seniors should watch that making your gift through a direct designation allows
they don’t trigger a claw back of their you to continue to benefit from the registered plan
Old Age Security, which occurs once
their income exceeds $79,845 (for 2021). during your lifetime.
• Your RRSP/RRIF funds are also not subject to Ontario
• Always ensure you review your probate fees.
financial situation carefully with
your advisors.
All of the ideas presented in this article are general and are not a substitute for professional advice specific to your particular situation.