If your client contributes $10,000 to their partner’s spousal RRSP in 2022 and the partner withdraws $6,000 in early 2024, $6,000 will be taxed to the contributor.
That’s because contributions in 2022, 2023, and 2024 are all within the three‑year attribution period. If they wait until 2025 or later, the withdrawal would be taxed to the annuitant instead.
A spousal RRSP can be harder to manage if the relationship ends. Even though the account is in the annuitant’s name, the contributor might request an equalization of assets during separation or divorce. If a spouse dies, the RRSP can roll over tax-free to a surviving spouse’s RRSP or Registered Retirement Income Fund (RRIF).
“We must look far into the future at possible risk factors,” Enhorning said. “There can be unknowns in every marriage, and we can mitigate some in regard to income splitting by being proactive with a spousal RRSP.”
If no beneficiary is named, the funds are withdrawn and taxed through the deceased’s estate. Naming a beneficiary or successor holder in the will or plan can help avoid delays and unexpected taxes. As a financial advisor, you need to make sure that your clients plan for both scenarios in advance.