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Gifts of RRIF or RRSP Funds
Gifts made through RRSPs and RRIFs are a popular way to offset taxes owing on funds at the time of death. You can name your charity of choice as beneficiary and your gift will be treated as a charitable donation in the year of death and is therefore eligible for a tax credit on your final tax return, and/or the one immediately preceding the final return. Typically these funds pass on tax free to a surviving spouse; however, on the death of the surviving spousethe total remaining value of those funds becomes taxable on that individual’s final tax return. You have the choice to either pay the tax through your estate or eliminating the tax by gifting the funds to your favorite charities.
You may avoid tax liability altogether because in most circumstances, the tax credit generated by the gift will fully offset the tax owing.
Also, you may convert your RRSP on a tax-free basis to a life annuity which guarantees fixed lifetime payments which are taxed on a per payment basis. By purchasing an annuity with your RRSP and making a charitable contribution at the same time, you reduce taxes payable.