Overcoming the Tax Liability of Your RRSP/RRIF (RRSP/RRIF Conserver)
RRSPs and RRIFs are taxable on death unless inherited by a spouse and transferred to a spouses plan. If single, or upon death of the surviving spouse, the estate must pay substantial tax (as much as 50%) before the assets are transferred to heirs. The RRSP/RRIF Conserver provides the funds to pay the tax, without depleting the value of the inheritance for the family.
Your client establishes an insurance policy with an insurance amount adequate to cover the projected tax payable on the RRSP/RRIF at life expectancy. The policy is to provide tax-free insurance proceeds to offset the tax liability. For a married or common-law couple, the plan is joint life, last to die, assuming that the surviving spouse inherits the deceased spouses RRSP/RRIF, and therefore the tax liability is at the death of surviving spouse. For a single client, a single life policy is established.
The recommended insurance plan is a Universal Life policy increasing insurance pattern with level insurance costs. Premium deposit amounts are dependent upon clients financial circumstances. It is recommended that premium deposits be completed before retirement age or as soon as possible (within 3 to 10 years). That way, your client can take advantage of the tax-preferred status of UL investments to pay the insurance cost on a before-tax basis. The insurance costs are withdrawn from the policys Account Value. The beneficiary options are payment directly to the heirs or to the deceaseds estate if needed to provide estate liquidity to pay the tax. However, insurance proceeds received by the estate are subject to provincial probate fees.
For more information on how to personalize based on your own situation contact FSE Financial Group Broker at 403-253-7007
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