Is it a good tax strategy to transfer money to my children’s investment accounts?


Question: I am a 64 year old widow with two adult children who are the beneficiaries of my estate. My pension is sufficient for my living expenses. I have $ 380,000 in RRSPs, which will be taxed at 40% on my death. I plan to convert part of my RRSP to a RRIF and withdraw $ 10,000 annually starting in 2019. I would prefer to pay tax on this additional income each year.

Since I don’t need the money, I plan to open an investment brokerage account with my children and transfer in-kind assets equivalent to $ 10,000 annually. This way, when I die, my children can share the investment assets in the account equally without having to pay tax. Anything left in my RRSP / RRIF will be subject to a 30-40% tax, of which I am aware. Is this a good strategy? Did I miss something?


A: Well done, Alex. A +. You have clearly done your homework. The strategy is reasonable, says Kurt Rosentreter, senior financial advisor at Manulife Securities. But it does highlight a few areas to consider, for bonus points.

Related: So Your Child Will Inherit Millions

First of all. Review the calculations on how much to withdraw, taking into account the amount of your pension and any other income you have. Rosentreter says, “The amount of the $ 10,000 withdrawal is not that large that it will result in a smaller RRIF upon his death. But if she pulls out further, the government could get her FS back. She has to look at the numbers and find the happy medium.

Second. Consider your financial needs throughout the different phases of retirement. Your life at 64 can be very different from your life at 94. Rosentreter warns you: “Don’t give until you have enough health care at 90!” It could cost you $ 8,000 per month. Of course, that number can be at the high end of the range. But his point is to take the scenario far enough that you consider an expensive period of care.

Related: How Do I Invest a $ 60,000 Inheritance?


Comments are closed.