# Spousal RRSP Question



## yosifcuervo (Jul 14, 2016)

Hi, I have been looking into spousal RRSP contributions, and what I am about to propose seems obvious to me, but I feel that I must be missing something as it is too simple. Let's say you make $100,000 / year, and your spouse has no income. Could you not contribute to their RRSP, but have them immediately withdraw the money? It seems like this would shift the tax burden and effectively perform income-splitting.


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## NorthKC (Apr 1, 2013)

No. THere must be a 3-year waiting period after the last contribution to the RRSP spousal account to avoid having income attributed back to you.

You're still correct though in shifting the tax burden to the spouse if they have no income. 

Also, you can only contribute to YOUR max RRSP room so if you only have $4,000 room available, you can only contribute $4,000 to your spouse's rrsp account.


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## yosifcuervo (Jul 14, 2016)

That's still a great deal though. Instead of investing and expecting a single-digit return, you could take a large amount of savings, contribute to your spouse's RRSP, and enjoy a much larger (not to mention immediate at tax time) return through your tax savings. And the only downside is that your money is locked in for 3 years? In an RRSP which is still making investment returns on it's own? That's crazy.

One thing I was wondering is if the spouse has already contributed a large amount of money to their existing RRSP, would that make a difference? How does the tax man know which money is being withdrawn, or would the money from the spousal contribution take precedence?


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## gibor365 (Apr 1, 2011)

yosifcuervo said:


> That's still a great deal though. Instead of investing and expecting a single-digit return, you could take a large amount of savings, contribute to your spouse's RRSP, and enjoy a much larger (not to mention immediate at tax time) return through your tax savings. And the only downside is that your money is locked in for 3 years? In an RRSP which is still making investment returns on it's own? That's crazy.
> 
> One thing I was wondering is if the spouse has already contributed a large amount of money to their existing RRSP, would that make a difference? How does the tax man know which money is being withdrawn, or would the money from the spousal contribution take precedence?


Yeap, it's a great deal  We're using SRRSP since we came to Canada 17 years ago  . Just surprised that many Canadian born guys don't know it...
If even 2 spouses in the same tax bracket, I think it's better to have SRRSP (and later RRIF) on the name spouse who older/gonna retire earlier.
RRSP and SRRSP are 2 different accounts, so taxman knows perfectly "who is who" 



> THere must be a 3-year waiting period after the last contribution to the RRSP spousal account to avoid having income attributed back to you.


 AFAIR 2 years, no?!


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## OnlyMyOpinion (Sep 1, 2013)

yosifcuervo said:


> That's still a great deal though. Instead of investing and expecting a single-digit return, you could take a large amount of savings, contribute to your spouse's RRSP, and enjoy a much larger (not to mention immediate at tax time) return through your tax savings. And the only downside is that your money is locked in for 3 years? In an RRSP which is still making investment returns on it's own? That's crazy.
> One thing I was wondering is if the spouse has already contributed a large amount of money to their existing RRSP, would that make a difference? How does the tax man know which money is being withdrawn, or would the money from the spousal contribution take precedence?


Their RRSP remains theirs, you contribute to a Spousal RRSP. I can't exactly recall if theirs can be 'changed' to a spousal plan? but in any event any withdrawl from a spousal plan within the 3 years would be attributed to you. So you wouldn't want any contributions made in the previous 3 years.
Remember, when they do withdraw money after 3 years it will be taxable in their hands, so they may end up paying some tax and/or your spousal tax credit may be affected.
I would ensure I'm maximizing both of our TSFA's before I started playing around with a spousal RRSP in that manner.


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## Eclectic12 (Oct 20, 2010)

yosifcuervo said:


> That's still a great deal though.


As long as one stays in the rules and the tax rates work in one's favour ... it is a good deal.




yosifcuervo said:


> ... you could take a large amount of savings, contribute to your spouse's RRSP, and enjoy a much larger (not to mention immediate at tax time) return through your tax savings. And the only downside is that your money is locked in for 3 years?


Assuming it's a spousal RRSP and the other factors work ... this is true.




yosifcuervo said:


> ... One thing I was wondering is if the spouse has already contributed a large amount of money to their existing RRSP, would that make a difference?


Depends on what the "existing RRSP" is. 




yosifcuervo said:


> ... How does the tax man know which money is being withdrawn, or would the money from the spousal contribution take precedence?


In a spousal RRSP, if the time limit is not being followed ... the spouse's contributions take precedence. At the time of contribution, one is recording which spouse is making the contribution. This means that the contribution activity is being recorded.

http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/rrsp-reer/wthdrwls/spsl-eng.html
http://www.moneysense.ca/columns/super-saver/the-facts-on-spousal-rrsp-withdrawals/




gibor365 said:


> NorthKC said:
> 
> 
> > ... THere must be a 3-year waiting period after the last contribution to the RRSP spousal account to avoid having income attributed back to you.
> ...


Actually, it varies ... depending on the timing of the contribution. The more accurate description is "three calendar years".

If you check the CRA link above which is for the 2015 tax year ...


> If you contributed to any spousal or common-law partner RRSP or your spouse’s account under an SPP in 2013, 2014 or 2015, you may have to include in your 2015 income all or part of ...


Where one made a Dec 2012 spousal RRSP contribution, with a Jan 2015 withdrawal by the plan holder ... the three calendar years have passed in something over twenty four months. Whatever amount is withdrawn is reported on the plan holder's income tax return.

On the other hand, making a Jan 2013 spousal RRSP contribution - to achieve the same thing, one needs to wait until Jan 2016 or something over thirty six months.


Anything shorter than this triggers the attribution rules.


Cheers


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## Eclectic12 (Oct 20, 2010)

OnlyMyOpinion said:


> Their RRSP remains theirs, you contribute to a Spousal RRSP. I can't exactly recall if theirs can be 'changed' to a spousal plan?


You can convert a personal RRSP to a spousal one. 

The general advice is to avoid doing this as the separate RRSPs make it easy to track what can be withdrawn with no timing concerns (i.e. the personal RRSP) and what RRSP one has to pay attention to the timing of the contributions/withdrawals (i.e. the spousal RRSP).





OnlyMyOpinion said:


> ... in any event any withdrawl from a spousal plan within the 3 years would be attributed to you. So you wouldn't want any contributions made in the previous 3 years ...


What can be confusing is that it is not a fixed time that matters ... it is the three calendar years. As per the examples in post #6, three calendar years may mean as little as twenty four months or as much as a full thirty six.


Cheers


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## gibor365 (Apr 1, 2011)

> Anything shorter than this triggers the attribution rules.


 I don't recall exact rule ... is it FIFO or LIFO?

For simplicity , it $10,000 contribution was in 2010 and $2,000 in 2014 ... and owner redeem $5,000 in 2016.
Who gonna pay taxes on this redemption , owner or contributor?


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## yosifcuervo (Jul 14, 2016)

It's an interesting concept - what I understand now is that you would lose an equal amount of your spousal benefit in the year which they withdraw from, so the main benefit is that you get the money now instead of later. If you invest that money then there are obvious benefits over those 2-3 years. Or it could be used in an emergency situation where you really need a few grand around tax time, or as a great buffer if you get hit with a large tax bill for other reasons.

There would be income-splitting benefits when transferring sums surpassing the spousal benefit amount as well, but at those levels I imagine you would quickly run into the RRSP deduction limit if you haven't already.


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## gibor365 (Apr 1, 2011)

> so the main benefit is that you get the money now instead of later.


 sure. let's say that you're in the highest tax brackets and your spouse doesn't have income. You open SRRSP and contribute 20K, thus you gonna pay 10K less in taxes and your spouse doesn't pay any tax as her income is just 10K. 
Now, you invest those 10K for 3 years, and after this your spouse redeems those contributed 20K + earned income (assume total 25K) and pay below 3K in taxes... thus , you just saved


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## Eclectic12 (Oct 20, 2010)

gibor365 said:


> I don't recall exact rule ... is it FIFO or LIFO?


Neither ... Contributor's contributions across three calendar years first out (CC3YFO).

All non-holder contributions get recorded on the non-holder's income tax (usually the one with the higher income). 
Once the non-holder's contributions are used up, the remainder (if any) goes on the holder's tax return.




gibor365 said:


> ... For simplicity , it $10,000 contribution was in 2010 and $2,000 in 2014 ... and owner redeem $5,000 in 2016.
> Who gonna pay taxes on this redemption , owner or contributor?


Both are reporting part of the $5K.

The $10K is more than three calendar years in the past, so it is irrelevant. 

The $2K contribution was made in less than three calendar years so the contributor reports $2K the lessor of the withdrawal or their contributions. In this case, $2K.

The owner withdrew $5K, so the owner reports the remainder $3K on their tax return.


The assumption is that all contributor contributions made in the three calendar years are attributed back to the contributor's tax return before the owner starts reports income. 


Cheers


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## gibor365 (Apr 1, 2011)

Thanks Eclectic12 

Now another example  , just called it "gibor's gambit" 
1. My wife last contribution to my SRRSP was 2016
2. In 2019 I redeem portion of the money , obviously I pay taxes as 3 years passed.
3. Can my wife contribute into same or into new opened SRRSP in 2020 (with proceeds from redemption i did )?


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## twa2w (Mar 5, 2016)

Just to clarify the rule as to withdrawal of spousal rsps.

The time frame for a contribution to not be attributed back, is the year of contribution(the actual date of the money being deposited not the year it is deducted for) and the following two calendar years.
After that the withdrawals will be taxed in the owners hand.

What you also have to remember is that the rule applies to any spousal contribution. In other words lets say I contribute to a spousal plan at TD in Jan 2015 for the 2014 tax year and to a spousal plan at RBC in 2016. If my spouse takes the money out of her TD RSP in 2017, the withdrawal will be attrbuted to me.


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## twa2w (Mar 5, 2016)

gibor365 said:


> Thanks Eclectic12
> 
> Now another example  , just called it "gibor's gambit"
> 1. My wife last contribution to my SRRSP was 2016
> ...


IIRC technically the answer is no. Unlike a tfsa, you cannot lend your spouse the money to make an rsp contribution.
Strictly speaking you should use your money for household expenses while your spouse saves her money to make the contribution to the spousal rsp.
From a practical stand point with joint accounts etc I would think there would be no issues because CRA could not tell what you used the money for. Unless of course they found a clear paper trail from the rsp to your account to her account to the rsp. But if funds are comingled for a while I can't see how CRA could make a case.
Besides CRA would have to audit you and be suspicious of the transaction. Not worth their while unless you are talking big dollars.


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## gibor365 (Apr 1, 2011)

twa2w said:


> IIRC technically the answer is no. Unlike a tfsa, you cannot lend your spouse the money to make an rsp contribution.
> Strictly speaking you should use your money for household expenses while your spouse saves her money to make the contribution to the spousal rsp.
> From a practical stand point with joint accounts etc I would think there would be no issues because CRA could not tell what you used the money for. Unless of course they found a clear paper trail from the rsp to your account to her account to the rsp. But if funds are comingled for a while I can't see how CRA could make a case.
> Besides CRA would have to audit you and be suspicious of the transaction. Not worth their while unless you are talking big dollars.


No way CRA can do something about it... My wife will continue to get salary and we have joint account.... how they can know?!


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## twa2w (Mar 5, 2016)

gibor365 said:


> No way CRA can do something about it... My wife will continue to get salary and we have joint account.... how they can know?!


They don't, how do you even know if the money is pooled whichdollars are whos.
As I said, only if there is an obvious paper trail or you do it all the transactions over a few days and there is no place else the money could come from and cra audits you and they happen to have so e reason to be suspicious enough tocheck that transaction and it is large enough - a perfect storm IMHO highly unlikely. Have not heard of a case of them going after money given to spouse for rsp.


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## gibor365 (Apr 1, 2011)

gibor365 said:


> Thanks Eclectic12
> 
> Now another example  , just called it "gibor's gambit"
> 1. My wife last contribution to my SRRSP was 2016
> ...


I understand that scenario above is fine . Now another scenario 
1. My wife last contribution to my SRRSP was 2016
2. In 2019 I convert RRSP to RRIF and start to withdraw minimum payment, obviously I pay taxes as 3 years passed (most likely I don't need to pay taxes as amounts will be small) .
3. Can my wife contribute into same or into new opened SRRSP in 2020 or 2021 ?[/QUOTE]


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## AltaRed (Jun 8, 2009)

Where an issue can arise is if the spouse is making SRRSP contributions (and paying for expenses) in excess of her net cash contribution to the joint account. That would be a clear bust in the paper trail.

That said, it is not that difficult for the higher income spouse to make SRRSP contributions and get the 'higher' tax deduction.


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## gibor365 (Apr 1, 2011)

> Where an issue can arise is if the spouse is making SRRSP contributions (and paying for expenses) in excess of her net cash contribution to the joint account. T


 not a case in our situation


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## ian (Jun 18, 2016)

My understanding of the provision are that LIFO and FIFO are meaningless.

CRA does not appear distinguish between pots of money based on where/when they are deposited. They view as one large aggregated amount. This means that you can only use this as a tax dodge once every three years-assuming no contributions in the preceeding three years. If you withdraw money from a spousal RSP inside of three calendar years then the monies will be taxed in your hands.

Spousal RSPs are OK but in retirement it really depends on your other sources of income and your tax position. In our case my DB pension can be split with my spouse. We have set up spousal loans so that investment income can also be split. Don't have a lot in spousal RSPs simply because I never had very contribution room because of the DB plan. But now, in early retirement, the spousal RSP's are not particularly beneficial to us because of the pension income splitting and spousal loans.


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## gibor365 (Apr 1, 2011)

> Spousal RSPs are OK but in retirement it really depends on your other sources of income and your tax position. In our case my DB pension can be split with my spouse.


 it also depends at what age you retire , as regular split income was cancelled by "greedy bastards"


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## Eclectic12 (Oct 20, 2010)

ian said:


> My understanding of the provision are that LIFO and FIFO are meaningless.


True ... 




ian said:


> ... CRA does not appear distinguish between pots of money based on where/when they are deposited. They view as one large aggregated amount. This means that you can only use this as a tax dodge once every three years-assuming no contributions in the preceeding three years. If you withdraw money from a spousal RSP inside of three calendar years then the monies will be taxed in your hands.


I suspect I know what you mean ... but to be clear, only the owner of the spousal RRSP can withdraw. At that point, the CRA rules are going to add up all the non-owner's contributions within the three calendar years and ignore the owner's contributions. 

At that point, up to the total of the non-owner's contributions have to be reported on the non-owner's return then when that is used up ... then the owner starts reporting on their tax return the rest of the income.


(I might be being overly detailed but "you withdraw money from a spousal RSP inside of three calendar years then the monies will be taxed in your hands" does not make sense for attribution rules. You withdrawing means you own it ... which means any attribution would be onto your spouse's tax return.) 




ian said:


> Spousal RSPs are OK but in retirement it really depends on your other sources of income and your tax position ...


It's probably just the wording but *both* spouses sources of income and tax position matter.

My co-worker and his wife are both in employment, full accumulation mode where her income is four levels lower than his. He has the better DB pension where I believe she has a DC pension. He's using the spousal RRSP refund to more fully stock their TFSA accounts. He married later in live so her investment income shouldn't be large, even if he gets around to a spousal loan for investing.


Cheers


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## twa2w (Mar 5, 2016)

gibor365 said:


> I understand that scenario above is fine . Now another scenario
> 1. My wife last contribution to my SRRSP was 2016
> 2. In 2019 I convert RRSP to RRIF and start to withdraw minimum payment, obviously I pay taxes as 3 years passed (most likely I don't need to pay taxes as amounts will be small) .
> 3. Can my wife contribute into same or into new opened SRRSP in 2020 or 2021 ?


[/QUOTE]
Yes providing you are not 71 or older.
Note for a conversion of a spousal rsp to a RIF, there are no attribution applied towithdrawals within the 3 years providing they are minimum paymts only. So in your example, you could actually convert to a RIF in 2016 and start minimum paymrnts in 2017 and face no attribution. Note there is no minimum payment on a rif in year it is set up.
I believe your spouse in this case can contribute to a spousal rsp in 2017, and onwards as long as you only make minimum withdrawals but I would have to confirm this.


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## gibor365 (Apr 1, 2011)

> So in your example, you could actually convert to a RIF in 2016 and start minimum paymrnts in 2017 and face no attribution. Note there is no minimum payment on a rif in year it is set up.
> *I believe your spouse in this case can contribute to a spousal rsp in 2017*, and onwards as long as you only make minimum withdrawals but I would have to confirm this.


This is very important question!
When I retire i have those 2 options:
1. Wait 3 years, withdraw lump sum from my SRRSP and on 4th years my wife can accumulate 4 years RRSP room and start contributing into SRRSP again
2. Convert SRRSP to SRRIF right away, withdraw minimum payments and let my wife contribute immediately into my SRRSP (if it's possible) and contribute to my personal RRSP


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## OnlyMyOpinion (Sep 1, 2013)

OK (kidding ) - Notice is given that if you persist in trying to game the system and/or pervert the purpose for which spousal RRSP's were established, you will be stricken with premature senility, will totally mess up your withdrawls and will incur the wrath of the CRA-gods who will you throw you into debtor's prison for the rest of your retirement years! :biggrin:


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## ian (Jun 18, 2016)

Go on line and get the CRA Interpretation Bulletin or go to the library and get something like Jacks on Tax. Everything should be there...all your questions will be answered and they will be accurate.


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## gibor365 (Apr 1, 2011)

ian said:


> Go on line and get the CRA Interpretation Bulletin or go to the library and get something like Jacks on Tax. Everything should be there...all your questions will be answered and they will be accurate.


OK. Found the answer!


> When a spousal RRSP has been converted to a RRIF, it becomes a spousal RRIF, and withdrawals are made by the spouse (not the contributing spouse). There may be attribution of income to the contributing spouse for any RRIF withdrawals that are in excess of the minimum annual withdrawal for the year, depending on the amount of spousal contributions in the year or the two immediately preceding taxation years.


http://www.taxtips.ca/rrsp/rrifminimumwithdrawal.htm

Very nice! My SRRIF minimum would be in 6K-8K range,( just enough for booze and cigarettes ) and my wife will continue every year to max up her contributions (even though I'll need to open new SRRSP)


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