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The Money Management Newsletter: RSP Planning
Considering a spousal RRSP?

The long-term objective of investing in a spousal RRSP is to minimize taxes for a couple during retirement by putting retirement income in the hands of the lower income spouse. It's based on the assumption that the current lower-income spouse will continue to have the lower income tax bracket during retirement. An additional tax benefit is that as each spouse reaches 65 , the first $1,000.00 of RRIF or annuity income from a matured RRSP is eligible for the Pension Income Tax credit.

How does it work?

The higher income spouse contributes to an RRSP for the lower income spouse. The amount that can be contributed depends upon the contributors allowable RRSP contribution room. The contributor receives the immediate tax advantage while the funds become the property of the spouse. If the spouse cashes in the proceeds of any spousal RRSP within 3 tax years of any spousal contribution being made, the proceeds will be taxed in the hands of the contributor (this does not include redemptions under the Homebuyers Plan).

Funds for a spousal plan should be kept in a separate RRSP. They should not be combined with any other RRSP funds the spouse may have.

Who is a spouse?

The definition of spouse and common-law spouse is undergoing some changes.

For the 2000 tax year, the following applies:

1) Spouse - you have a spouse when you are legally married

2) Common-law spouse - he/she is of the opposite sex, has a relationship with you and;

A) you have lived together for at least 12 continuous months;


B) you have previously lived together for at least 12 continuous months and you are living together again;


C) he/she is the natural or adoptive parent of your child.


For the 2001 tax year, the following applies:

1) Spouse - refers to a married partner

2) Common law spouse - can now be a same-sex or opposite sex partner who meets any of the common-law conditions described for the year 2000 tax year.

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