RRSPs and Dependents

Last week I was approached to help on an interesting case. Without going into the specific details, here is the scenario. A young man has learned that he does not have long to live and wants to make sure his children benefit from his RRSP. He is being realistic and realizes his wife may remarry in the future. So he is contemplating the best way to ensure his children get his RRSP money. One approach would be to make the children beneficiaries of the RRSP. This certainly gets the job done, but with a very hefty tax bill at the time of his death. Another would be to use the spousal transfer rules at death and move his RRSP to his wife on a tax deferred basis, with the hope that the money will eventually be used for the benefit of his children. Or, use the RRSP to purchase a term certain annuity payable to the children (or in-trust for the children). The annuity can provide for payments based on a period of not more than 18 years minus the age of the child or at the time of its purchase. Payments from the annuity must begin within one year of purchase and end by December 31st of the year before the child's 18th birthday. In this case, there is a risk that when the child turns 18 they spend the money unwisely. I spoke with a few advisors about this case and each of the above ideas has merit. As usual, every situation is different, and a consultation with a family law specialist would be prudent. Take care, Scott Edgington Director of Wealth Qualified Financial Services Scott.edgington@qfscanada.com 416-786-4140