Tips For Seniors

Wealth Planning Checklist for Seniors

Wealth Planning Checklist for Seniors… this information was written by Total Wealth Planning, Scotia Capital Inc. 

As you get older and start thinking more about preserving your wealth and passing it on to the next generation, taking advantage of tax, investment and estate planning strategies become increasingly important


While many of these options are available to you during your lifetime, others are more relevant after you turn 65.


The following checklist outlines some common planning considerations to think about as you enter retirement.


Tax credits and government benefits:


  • Age amount– If you’re age 65 or over, you may be able to claim a maximum amount of $8,396 for the 2023 tax year, subject to an income threshold.


  • Pension income amount– You can claim up to $2,000 if you receive an eligible pension, superannuation or annuity payments. Generally, the eligible pension depends on the type of income and/or your age. For example, RPP payments are considered “qualifying pension income” regardless of age. But RRSPs only qualify as eligible pension income if you’re at least 65 or the amounts are received due to your spouse’s death.


  • Eligible medicalexpenses – These include attendant care paid for you, your spouse and children and can be claimed as a non-refundable tax credit. Typically, retirees no longer have employer health insurance to reimburse medical expenses incurred. The credit becomes available when the total unreimbursed eligible medical expenses exceed the annual threshold. The 2023 threshold is 3% of net income or $2,635, whichever is less. Consider having the lower-income spouse claim all the expenses since their income threshold is lower.


  • Old Age Security (OAS)– OAS benefits are available to individuals 65 years of age or older and meet the eligibility requirements. OAS payments are income-tested and subject to clawback. If you anticipate a clawback at age 65, you can postpone receiving your OAS payments for up to five years and, in turn, receive a higher OAS monthly payment.


  • Canada Pension Plan (CPP)/Quebec Pension Plan (QPP) – CPP or QPP payment amounts are based on your age and past contributions to these programs. You can start receiving CPP and QPP as early as age 60, but you will receive a reduced pension. You can also delay receiving payments until age 70 and receive an increased monthly amount.


Minimize taxes in retirement:


  • Pension income splitting – If your spouse has a lower marginal tax rate, consider splitting eligible pension income. Under these rules, a higher-income spouse may transfer up to 50% of eligible pension income to a lower-income spouse, which reduces your household’s total income tax liability.


  • Converting RRSP to RRIF – In the year you turn 71, instead of withdrawing the entire RRSP amount, you may transfer it to an RRIF or purchase an annuity. This will defer the income needed to be reported that year and you can set smaller, periodic payments that are taxed over time. It’s important to note that an RRSP may also be converted to an RRIF before age 71.


  • Spousal RRSP contributions – If you anticipate your retirement income to be higher than your spouse’s income, consider making contributions to a spousal RRSP. You can contribute to a spousal RRSP until your spouse reaches age 71 and use any unused RRSP contribution room while still qualifying for a deduction on your current year’s tax return.


  • Final year RRSP contribution – If you’re turning 71 this year, still generating RRSP contribution room or have unused RRSP contribution room, consider making a final RRSP contribution before converting your RRSP to an RRIF. You will still be able to realize an RRSP deduction in your current year’s tax return.


  • RRSP contributions beyond age 71 – If you’re older than 71 and still generating RRSP contribution room, consider making RRSP contributions to a spousal RRSP if your spouse is younger than 71. You still receive the tax deduction, and the assets continue to grow tax-deferred until your younger spouse turns 71, when they must convert their RRSP to an RRIF.


  • TFSA contributions – By contributing to your TFSA, any income earned in a TFSA, and withdrawals made from a TFSA are tax-free and do not affect your federal government income-tested benefits or your entitlement to income-tested federal tax credits. In addition, TFSAs can be used to shelter money you may not currently need. For example, if you don’t need your entire minimum RRIF income, consider contributing any excess after-tax RRIF amounts to your TFSA.


  • Use younger spouse’s age for RRIF withdrawals– If you don’t need your annual minimum RRIF payments immediately and your spouse is younger, consider using your spouse’s age to determine your minimum yearly taxable RRIF withdrawals.


  • CPP/ QPP sharing– If you and your spouse are age 60 or older, receiving (or are eligible to receive) CPP or QPP benefits, and you will have higher income in retirement, consider sharing these pension benefits with your spouse. You can do this by applying to Service Canada/Retraite Quebec, and they will determine the portion that may be allocated to the lower-income spouse to be taxed.


Transfer and preserve your wealth:


  • Create or update your Will– While having a Will is important, it should be regularly reviewed to be effective. It’s a good practice to review it at least every three years or whenever there is a major change in your life, such as having a grandchild, entering retirement, experiencing a significant health event, or facing a change in your financial situation.


  • Power of Attorney– As part of your Will, and as you age, you may become mentally or physically unable to manage your assets. As a result, you may need to appoint a Power of Attorney for Property and a Power of Attorney for Personal Care to make decisions on your behalf. Learn more about the different types of Power of Attorneys.


  • Testamentary trusts– Consider creating a testamentary trust through your Will. With some exceptions, the tax benefits are limited over the long term, but this kind of trust can allow you to control the timing and distribution of your estate assets.


  • Inter-vivos trusts– These are trusts created during your lifetime. They can be used for income splitting with family members and offer a means to transfer assets outside your estate. If you are 65 or over, an alter ego trust or a joint partner trust (for spouses) may offer additional tax and estate planning opportunities for you and/or you and your spouse.


  • Gifting assets– If you want to gift assets to your children or grandchildren during your lifetime, providing an outright gift may be a good option for you and your family. However, from a tax perspective, you are deemed to have disposed of the assets at fair market value and are subject to pay tax on any gains. Furthermore, if the gift is made to a minor, you should be mindful of the attribution rules that may eliminate the tax benefits associated with making the gift.


  • Gifting public securities– Consider gifting your publicly traded securities directly to qualified registered charities. Gifts of publicly traded securities or mutual fund units are not subject to capital gains and qualify for a tax credit. These two savings make it the most tax-effective way to make a significant donation. Consider combining a sale of securities with an in-kind donation of securities to eliminate taxes at disposition.

Insurance solutions – To preserve the wealth you have worked so hard to build, insurance solutions can be used to fund tax liabilities at death, while some insurance policies can protect your wealth from the effects of taxation as it grows through your lifetime. In addition, they can provide a means of estate equalization for heirs, increase the size of a planned charitable gift, or provide a guaranteed retirement income.