The ultimate benefit of a Registered Retirement Savings Plan (RRSP) is that once you retire and need to withdraw these funds you will most likely be in a lower tax bracket because you are living off a reduced income.
However, you may find during your lifetime you are in a financial position to donate a portion of these funds to charity and offset the tax implications with the charitable donation receipt. Everyone’s situation will vary, and you should be sure to consult your financial adviser regarding the tax ramifications.
In Instances of an Untimely Death
If a person is married and passes away, the tax sheltered funds of an RRSP can be rolled over – tax free – to the remaining spouse. If the person is single, or the remaining spouse passes away, a significant tax event occurs. Those funds that have been tax sheltered are now brought into the estate and are considered income, along with any other income, and taxes are due on the whole amount.
You can offset the taxes if the funds in your will are given to a charitable organization like HART. The donation receipt generates a tax credit that can, in most cases, offset the tax owing on the RRSPs. Another option is making HART the final beneficiary on an RRSP, Registered Retirement Income Fund (RRIF) or other registered pension plan. The gift bypasses the probate process and estate administrative costs are reduced. Again, the donation receipt can offset taxes owing on these funds.
Please consult your financial adviser regarding gifts of registered retirement funds, and how best to offset taxes so as to leave more in your estate for distribution to loved ones.