Can I Transfer My RRSP to My Spouse?

A Registered Retirement Savings Plan (RRSP) is a key tool for retirement savings in Canada. This account allows contributions to grow on a tax-deferred basis; taxes are paid upon withdrawal in retirement. The primary benefit of an RRSP is the tax deduction received for contributions, reducing taxable income.

Understanding Spousal RRSPs

A spousal RRSP helps couples balance retirement income and potentially save on taxes. One spouse (the contributor) uses their RRSP contribution room to contribute to an RRSP held by their spouse or common-law partner (the annuitant). The contributor claims the tax deduction for these contributions, while the annuitant is the legal owner of the plan and controls the investments within it. This benefits couples with unequal incomes, allowing them to equalize retirement income and benefit from lower tax brackets.

Attribution rules prevent immediate income splitting by taxing early withdrawals. If the annuitant withdraws funds within the contribution year or the two subsequent calendar years, the amount may be attributed back to the contributor for tax purposes. This means the contributor, not the annuitant, would be responsible for paying the tax on that withdrawal. The attribution rules do not apply if funds are withdrawn after the three-year period, upon the death of either spouse, or in the event of a relationship breakdown.

A spousal RRSP involves contributions to a plan in the annuitant’s name, not a direct transfer of an existing individual RRSP. Personal and spousal RRSPs are separate accounts, even if the same individual contributes to both. While the contributor uses their own RRSP deduction limit, the contributions do not reduce the annuitant’s personal RRSP contribution room.

RRSP Transfers During Relationship Breakdown

During a marriage or common-law partnership breakdown, RRSP assets can be transferred between former spouses on a tax-deferred basis. No immediate tax consequences arise for either party from the transfer. Transfers are permitted with a written separation agreement or court order.

Funds move directly between financial institutions, avoiding taxable withdrawals and contributions. To facilitate this tax-deferred transfer, Canada Revenue Agency (CRA) Form T2220 must be completed. This form ensures CRA recognizes the transfer as non-taxable.

The transfer of RRSP assets does not use the recipient spouse’s RRSP contribution room. Both the annuitant (the person whose RRSP is being transferred from) and the current or former spouse must sign Form T2220.

RRSP Transfers Upon Death

Upon an RRSP annuitant’s death, a tax-deferred transfer (rollover) of assets to a surviving spouse or common-law partner is allowed. This rollover allows funds to transfer to the surviving spouse’s RRSP, Registered Retirement Income Fund (RRIF), or an eligible annuity without immediate tax implications. This deferral preserves retirement savings value.

To qualify, the surviving spouse must be designated as the RRSP beneficiary directly in the plan. Alternatively, if the RRSP passes to the deceased’s estate, the will can direct the funds to the spouse, or the funds can go to a qualifying spousal trust. The surviving spouse or partner will then claim an offsetting deduction for the transferred amount.

Without a qualifying spousal beneficiary or rollover, the entire RRSP value is taxable income in the deceased’s final tax return, creating a significant tax liability for the estate. While exceptions exist for financially dependent minor children or disabled dependents, the spousal rollover is the most common method to defer taxation. The spousal rollover does not consume the recipient’s RRSP contribution room.