RRSPs - Are You Contributing This Year (NF)

[hydro]

Can you actually "hide" behind a beneficiary with a bank? Not that I am aware of, but who knows these days with them selling car insurance, etc. Ask whom ever has your RSP's. I'm pretty sure only a company that operates under a life insurance structure has the power to do so.

 

I think the actual key here is that the RRSP is held within a Life Insurance policy. I'm not %100 sure either that they could survive the bankruptcy. In bankruptcies cash value of policies are taken into considerations as assets - I just can't remember if they can be touched as RSPs.

 

And your right RSP's arent for everyone. If you have not earned income in years or carry forward, or am comfortable living on just cpp, oas/gis and gains-a (in Ontario) or some combo then thats your life style and thats ok.

 

Everyone should have some insurance though. Why leave it to the municipality to bury you or family.

[crusty]

Would inc. a small buisness protect your rrsp's, Either through a bank, or life insurance policy?

With or without a benificary?

[irishfield]

Would inc. a small buisness protect your rrsp's, Either through a bank, or life insurance policy?

With or without a benificary?

 

No Crusty, a business cannot hold an RSP. They are personal plans only.

[taper]

Irishfield, how do you retrieve the money once you retire, and what would happen if you named the wife the beneficiary and then divorced, can the beneficiary be changed.

[irishfield]

Taper..it's your RSP and you can change the beneficiary any time you like, like any insurance policy. She only gets the money if you die (before you withdraw or divorce!) and presumably if you're the higher earner you've been doing a spousal RSP for her and your plans are pretty even $ wise anyway if that divorce 50/50 split of assets thing happens. When you've retire or decide to withdraw it's like any RSP...you will have to pay income taxes on the withdrawal amount at a % based on your current income status (hopefully none so it's taxed as low as possible).

[crusty]

"walleyejigger....Do you have any chance of going bankrupt in your life time? Do you operate your own business, are you open to lawsuit, frivilous or otherwise. drive a boat without sufficient insurance coverage, build flying machines, have people land in your yard that could crash/die and have spouse/family sue your ass...etc ..etc.. or any scenario that sees you sued for more than your insurance company is going to cover you for?

 

Any RSP you've worked hard to build up that is held with a bank/trust company etc is gone in the above scenarios.....RSP's with a life insurance company with a named beneficiary can not be touched by any of the above...because it's not your money..it's assigned to someone else already, you just haven't died yet."

 

 

 

Would inc. my small buisness make a my personal rrsp protected when named in a lawsuit.

I have two million liabilty, But being a a heating contractor, I have the potential to be sued for more. ie burn down a row of homes,

all contents, or even god forbid, kill or maim. My understanding is, unless I inc. I am open to such lawsuits if I was to be namned personally in a lawsuit.

 

How should I be structuring my rrsp.. Does it do me any good to hide behind the vail of life insuance.

[irishfield]

Crusty...even if you Incorporate in most cases you'd be the sole share holder, the secretary/officer/director etc of the company. You would still get named sooner or later in the suit when and if it ever comes to that. That's why I've always used the beneficiary style of RSP, cause you never know what's around life's corner. What you could invest in years back was quite limited in this type of RSP, but it's wide open now, especially with the total dropping of Canadian content laws.

 

Another little known tip, that even many accountants have yet to catch onto, is that CRA changed what you can carry over and above your current years allowable input to your RSP. It use to be if you had more than $2000 carry over that you could be subject to penalty. It is now penalized only if you have more carryover than the amount the years income allows for next years input. So if for example sake your 2006 income will allow you to be able to put $5,000 towards 2007 RSP's you can top up your 2006 contributions before March 1st to the max 2005's income dictated and you can also give your RSP holder an additional $5000 that you won't be able to claim against 2006 income...but it will start multiplying returns a year in advance. Even if you had to borrow it @ 8%, it's a bet I'd take considering this years anticipated returns of double that.

 

Another reason for spousal RSP's that I mentioned above. Say you've retired and have minimal income or none. One of your kids needs $15,000 for University. You and your spouse can each withdraw $7500 from your RSP's. This is below the personal deduction limit on our tax return and you'll pay no tax on it. If only one of you held the RSP and withdrew $15,000 you would be paying about 18% tax on the $7000 or so above the personal deduction limit.

 

Like Rick and Dan brought up there are other routes to savings/investments as well. All depends what your "end run" plans are and if you are staging for tax deferral later in life when your tax rate will be less (ie no income anymore lowering you from say a 48% tax bracket to 18% or similar when you go to take the RSP money out). If you are looking for interest on money that will be easily accessible there are also GIC's and Mutual funds. Keep in mind if you put the same money in a 5% GIC as you did in a mutual fund that made 5%. You will have to claim the entire 5% as taxable income from the GIC. With a mutual fund you will pay nothing until you either withdraw, or your fund name changes and at such time you'll have to pay income tax on only 50% of the gain, compared to 100% from a GIC. The only thing with a Mutual fund is you may win,,,you may lose. There is no guaranteed rate.

 

I've said enough here...if you want more info PM me and/or bigbuck that started this thread should start offering some advice, as I'm just a dumb Engineer..not a financial planner.

 

Cheers,

Wayne

Edited February 12, 2007 by irishfield