Latest news

Winter ’18 Should I give my registered retirement income fund (RRIF) to my children while I’m still living?

Dave's Investment Insights Newsletter – Winter 2018

Written by Dave Lee
January 18, 2018

You may be asking “why should my children have to wait until I die to benefit from their inheritance?” Perhaps you see your adult children or grandchildren struggling in today’s economy to afford a down payment on a home or to pay down a burdensome debt. You want to help them out now when they really need it and have the satisfaction of seeing them reap the rewards.

Some people prefer to wait until they die to leave their money. But if you favour a living inheritance, and can afford it, then gifting your children with your RRIF may be an option. Before you decide to do this, however, you need to understand the tax implications, as any amount withdrawn from your RRIF will be taxable.

You first need to determine if you have enough money to meet your own lifelong needs, considering the uncertainty of your life span and the potential costs of personal care in your later years. This is something I am well positioned to help you with. If you are confident that you have all the money you are likely to need, then it may be possible and even advantageous to gift from your RRIF now.

At a high tax rate, a full withdrawal of your RRIF may not make sense. In BC, tax on income over $200,000 will rise to 49.8% in 2018. But keep in mind that upon death the whole amount of your RRIF is taxable anyway unless your beneficiary is a surviving spouse. In that case the tax is deferred until they pass.

You are required after age 71 to make minimum withdrawals from your RRIF each year. If you withdraw the minimum amount yearly, your RRIF balance could remain relatively stable for many years if your investment returns are sufficient.

But unless your RRIF is “locked in” due to a pension plan transfer, you can take out more than the minimum, up to your full account balance. You could choose to make larger withdrawals while incurring as little as 20% in tax each year depending on your other sources of income. These funds could then provide ongoing financial support to your loved ones versus giving it to them in one lump sum when you die.

If an accelerated drawdown of your RRIF makes sense to you, I can guide you in making a decision that’s right for your circumstances.

Download the Complete Winter 2018 Investment Insights Newsletter