THE GLOBE AND MAIL - DIANNE MALEY
When a person dies, they are deemed to have disposed of their property at the time of death. If they are married, their assets can pass to the surviving spouse on a tax-deferred basis. Naturally, questions arise about future taxes.
So it is with Sadie, whose husband died earlier this year. She is 66 and semi-retired, with occasional work in health care.
Sadie has a defined benefit pension of $15,816 a year. She will get a Canada Pension Plan survivor’s benefit to bring her total CPP entitlement to the maximum allowable of $1,254 a month, or $15,048 a year. The market value of their combined investable assets is about $1.14-million.
Because her husband’s taxable income for 2022 was only $40,000, Sadie asks whether she can make a withdrawal from his registered retirement income fund before the end of the year to raise his taxable income and lower hers. “Would this withdrawal be credited to him or me?” Sadie asks in an e-mail. She is the beneficiary. “Should I switch his RRIF back to a registered retirement savings plan in my name?” she asks. She is concerned that her RRSP will be too big if she rolls in his RRIF. “I’d love to reduce it and pay the taxes at a slightly lower level.”
As well, Sadie is deferring property tax on her B.C. house and wonders whether she should pay it off or continue deferring. Her retirement spending target is $60,000 a year after tax.
We asked Ian Black, a fee-only financial planner at Macdonald, Shymko & Co. Ltd. in Vancouver, to look at Sadie’s situation. Mr. Black holds the registered financial planner (RFP) designation.
What the expert says
Sadie’s goal of retiring with an after-tax income of $60,000 a year is achievable, Mr. Black says. “She could actually spend more than $79,000 per year to age 97, which is 30 per cent more than her goal,” the planner says. In reality, she appears to be living on about $46,200 annually. Sadie could afford to stop working if she wants to.