CBJ JANUARY 2026

35 THE RRSP AND RRIF BENEFICIARY DESIGNATION JANUARY 2026 « The Canadian Business Journal 34 T he Canadian tax system provides generous tax credits for charitable donations. The reason the government provides these generous tax incentives and foregoes the tax revenue is to encourage Canadians to donate more to charities of their choice. Our government provides these tax incentives because it recognizes that charities can harness the time and efforts of millions of volunteers and the voluntary donations of Canadians and achieve more than would be possible for our government to do merely by collecting taxes. WHILE LIKE MOST Canadians you may donate to charities because you have a personal connection to the cause, want to make a difference and give back to your community, it is important that you take advantage of the tax incentives for charitable donations to maximize the impact of your donations during your lifetime and multiply your bequests. RRSPs and RRIFs are a great way of saving for retirement on a tax deferred basis. You receive a tax deduction on the amounts that you contribute during your lifetime, the funds will grow tax sheltered until you withdraw them at age 71 at which time you must convert your RRSP to a Registered Retirement Income Fund (RRIF) and start withdrawing income from it and pay tax on the income. However, RRSPs and RRIFs are one of the worst ways of transferring wealth to the next generation and are a ticking time bomb when it comes to taxes. If you are married, upon the death of the first spouse the entire balance of an RRSP or RRIF will be rolled over on a tax- free basis to the surviving spouse. The problem occurs if you are the second spouse to die or if you were never married. At that time the balance of your RRSP or RRIF is considered income in the year of death and will likely put your estate in the highest tax bracket. In 2025 in Ontario any income over $253,414 is taxed at the highest marginal tax rate of 53.53%. Therefore, even if you have no other income in the year of death, a modest RRSP or RRIF balance could easily put you in the highest marginal tax bracket. One strategy that can help you leave a Tina Tehranchian legacy to your charity of choice and maximize the amount of the total after-tax combined bequest and inheritance for your children is designating one or more charity of your choice as beneficiaries of your RRIF. This strategy would work in all provinces except for Quebec where you cannot directly name a beneficiary on an RRSP contract. Instead, you must designate beneficiaries for your RRSP through your will. Let’s consider the case of Mary, a very philanthropic retiree who lives in Ontario, to see how by using this strategy, she can leave a generous charitable bequest to ensure that the charity she has supported all her life will receive a bequest from her with minimal reduction in the inheritance she wishes to leave for her children. Mary is a 60-year-old widow and has $500,000 in her RRIF. She is using the income from her RRIF to support her lifestyle. She has Designating charities as beneficiaries of your RRSP or RRIF is a very quick and simple solution