I thought I would write this article, as I am most often not present when an employee completes their group RRSP application. Many parents want to see that their children are looked after financially after their death. And, many parents think leaving some or all of their RRSP funds is a good way to help their children. And, while their intentions are good, this may not be the best way to help. If the parent has a spouse, Canada Revenue Agency allows for a tax-free rollover of RRSP funds to the surviving spouse in the event of the death of the other. If the parent names a child as a beneficiary, this triggers tax on the RRSP funds.
The best approach, would be to leave some life insurance funds (even your group life insurance can be divided up) to the children and name your spouse as 100% beneficiary for your RRSP funds. The life insurance proceeds would flow to the children tax free, and the RRSP funds would rollover to the surviving spouse tax free.
Make it a great day everyone, and feel free to call me if you have any questions.
Jim Myers CEBS