RRIFs

Question 1

Can an individual contribute directly into a RRIF?

Answer 1

No. Assets used to establish a RRIF can only come from another registered plan.

Question 2

What is a prescribed RRIF?

Answer 2

A type of RRIF available to people who live in Saskatchewan and Manitoba.

Question 3

Can a RRIF be owned by an employer or a corporation?

Answer 3

No. Only an individual can own a RRIF.

Question 4

What are the rules regarding the minimum withdrawal from a RRIF?

Answer 4

• A minimum withdrawal is required starting only the year after a RRIF has been established
• There are no minimum withdrawals required in the first year the RRIF is established.
• No maximum withdrawal limits are also applicable.

Question 5

What is the advantage of using their younger spouse’s age to establish their RRIF?

Answer 5

Because the minimum withdrawal % increases with age, so the higher that minimum payment is—the lower the asset base of the RRIF gets, which means the shorter amount of time to preserve these assets.

Using a younger age would lower the minimum annual prescribed withdrawal amount and increase the opportunity to preserve the assets for longer to ensure current and future planning opportunities are not lost.

Question 6

Can the younger spouse’s age be used id the RRIF has already been established?

Answer 6

No. It has to be elected at the time the new RRIF is established. There are no retroactive changes available.

Question 7

What happens if an a relinquishing institution has to transfer RRIF assets to a RRIF in another company?

Answer 7

The relinquishing company has to withhold sufficient assets for the RRIF minimum payment if the RRIF minimum has not been paid yet and then they will transfer only the remaining assets to the new institution.

So the old institution must be the one to complete the minimum payment for that year.

Question 8

What is the current plus two year rule when it comes to income attribution?

Answer 8

It basically states that income may be attributed back to the contributing spouse if an excess amount (above the RRIF minimum) is withdrawn and the contributing spouse has made a contribution to the spousal RRSP in the current year or the 2 previous years.

Question 9

Does income attribution apply to RRIF minimum withdrawals?

Answer 9

No. It only applies to excess amounts.

Question 10

In what other case does income attribution apply apart from withdrawing the excess amount from a RRIF?

Answer 10

If the spousal RRIF becomes deregistered.

Question 11

What is the amount attributed to the contributing spouse if attribution rules apply?

Answer 11

The lesser of:

1. The excess RRIF withdrawal
2. The contribution made to the spousal RRSP in the current year or previous 2 years that wasn’t already attributed.

Question 12

Are all withdrawals taken in the first year a RRIF is set up considered an excess amount?

Answer 12

Yes.

Question 13

In which situations will attribution rules not occur?

Answer 13

1. Any payment received after the death of a contributing spouse
2. If contributing spouse or annuitant become a non resident at time of withdrawal
3. When spouses live separately and apart from each other due to marriage breakdown
4. Annuitant collapses RRIF to purchase a qualifying annuity.

Question 14

When can the spousal designation be removed from the plan?

Answer 14

Only upon death of the contributing spouse.

Neither divorce or transfer to another plan would result in removing the designation.

Question 15

Can a RRIF be transferred to an RRSP?

Answer 15

No. Except the excess amount. The excess amounts can be transferred to an RRSP

Question 16

Can a transfer directly occur from a RRIF to a qualified annuity?

Answer 16

No. Only the excess amount (after a RRIF minimum has been paid to the annuitant) can be transferred to an annuity directly.

Question 17

Do RRIF payments qualify for the pension income tax credit?

Answer 17

Yes.

The pension income tax credit is available to taxpayers who have reached age 65 by the end of the tax year.

Or under 65 in very limited circumstances

Question 18

Are RRIF payments also eligible for pension splitting between spouses?

Answer 18

Yes

Question 19

If an annuitant dies, and the beneficiary of the RRIF is someone other than a spouse/partner or a qualified beneficiary (financially dependent child/grandchild due to infirmity), who is responsible for the tax consequences?

Answer 19

The annuitant.

The annuitant’s income for the year of death must include the fair market value immediately before death and it must be reported on the deceased’s final return.

Question 20

What is a designated benefit?

Answer 20

A benefit paid out of a RRIF to a qualified beneficiary, which includes a spouse or common law partner or a financially dependent child or grandchild (earning income below the basic amount in the preceding year) or dependent due to mental or physical infirmity.

Question 21

What do designated benefits include?

Answer 21

1. The fair market value of the RRIF at date of death.

2. The income earned in the RRIF from date of death to Dec 31st or the year after year of death.

Question 22

Does the income earned by the RRIF after December 31 of the year after the year of death before proceeds are distributed qualify as a designated benefit?

Answer 22

No.

Question 23

What are the options available for a financially dependent child or grandchild who is healthy and receives a RRIF’s assets upon the death of the annuitant?

Answer 23

They can transfer the funds to a term certain to age 18 annuity which will spread out the tax consequences.

The annuity may provide payments based on a period of not more than 18 years - age of the child at the time of purchase.

Annuity must also begin no later than 1 year after purchase.

Question 24

What are the options for a financially dependent child or grandchild who is disabled to receive a RRIF’s assets upon the death of an annuitant?

Answer 24

To avoid taxes, they can transfer to:

1. RRSP (if younger than 72)
2. RRIF
3. Qualifying annuity

Question 25

If a qualified beneficiary does not transfer the funds from a RRIF of a deceased annuitant directly to a register plan or qualifying plan within the year of receipt or 60 days after and elects to receive the funds personally, what happens?

Answer 25

The qualified beneficiary pays tax immediately on the amount in the year of receipt.