Poll Results: Taxable RPP Benefits Should be Averaged

Our November Poll asked our readers to reflect on the tax consequences of deemed dispositions on terminal returns, specifically for RPP pension recipients and over 75% were in agreement with this question:   “Registered Pension Plan contributions are added to income in full on final returns of singles or widows/widowers. Would it be fairer to average this lump sum over the 24-month period prior to death?”  Some of your comments follow:

“Future tax liability in a registered plan is an issue advisors need to bring up with their valued clients.  Strategies such as a RRIF meltdown and leveraged loans to offset the tax burden can to a long way to protecting your clients current and intergenerational wealth.  Getting great advice is the key to an individual's and family's financial success.  KB can help you give that great advice to your clients!” – Rob Nelson

“It would be fairer to be able to average this out for the taxpayer.  After all, it took a long time presumably to accumulate the funds inside the registered account.  It should be average over a period so it doesn't hit all at once.” – Robert Litschel

“Any taxes on Seniors and their spouses is unfair” – Robert Kelley

The comments bring to light some important planning opportunities well before the death of a taxpayer.  As the baby boomer demographic is now actively retiring, it is possible to deaccumulate using the tax brackets and rates and income splitting as an opportunity to reduce overall taxes paid on this important family asset.

These taxpayers will have increasing financial concerns that a highly qualified retirement and succession services specialist can answer, especially with recent increases in inflation and potential higher taxes and the higher end of the income scale.

Advisors whose goal is to provide better financial coaching to boomers with significant life event decisions, should be able to help clients answer the following key questions:

• How much is enough?
• Can I unlock more of my pension funds earlier?
• How will my severance be taxed?
• Will an RRSP contribution preserve more of my severance?
• Am I maximizing income splitting opportunities withmy spouse?
• Am I doing so early enough?
• Should I take my CPP benefits early, or add more of my RPP benefits to income?
• Should I postpone my OAS to get a higher benefit after age 70?
• Should I consider a Personal Pension Plan in my business?
• How does divorce impact the sale of the family business or cottage?

Knowledge Bureau’s MFA™-Pension & Estate Services Specialist Designation program can help position advisors to help clients answer these questions and more. The curriculum includes the following courses:

• Personal Pension Planning
• Tax Efficient Retirement Income Planning
• Planning with Trusts
• Succession Planning for Owner-Managers
• Behavioural Finance in Risk Management
• Advising Family Business