Many individuals have registered retirements savings plans (RRSP’s), and many have registered retirement income funds. These tax deferred plans accumulate earnings and the lump sum or periodic payments are taxable to the recipient in the year the funds are withdrawn. Upon death of an individual, the balance in these funds is fully taxable unless they are left to a spouse or, in certain cases, children. The taxation of these amounts can result in substantial tax.
Donations in the year of death, e.g. via one’s will, can offset the tax resulting from the inclusion of RRSP/RRIF amounts.
In addition, one could withdraw funds from a RRSP/RRIF during their lifetime and the donation of these funds would offset the income tax resulting from the withdrawal. In fact, the tax reduction on the donation could be greater than the income tax resulting from the increased income as a result of the withdrawal. Thus, one could take a small portion of their RRSP/RRIF during their lifetime and make a meaningful contribution to the Church without increasing their income tax.
In all cases the donor has control of the RRSP/RRIF funds until the donation is made.
The Church is the beneficiary of a RRIF with a value of $150,000
Donation of RRIF:
Income tax to donor (46% x 150,000):
Federal & Ontario tax credits (46% x 150,000):
|Net income tax:||$0|
** could be lower depending on individual’s tax rates
see Assumptions for more examples.