Income splitting works at any age, but once you retire and start collecting government benefits it works even better—especially if you can use it to avoid the dreaded Old Age Security (OAS) clawback. Many government benefits are income tested so transferring income to a lower-income spouse may help the higher-income spouse reduce taxes and get more. For instance, if both of you are 60 or older and receiving CPP payments, the higher-income spouse can elect to attribute up to 50% of his or her CPP income to the lower-earning spouse. Want to save even more? If one of you is lucky enough to have a lucrative defined-benefit pension, you’re allowed to allocate up to one half to your spouse. Take that, tax man!
Tax savings: You can save thousands as you’ll have a lower blended rate of taxation, plus increased government benefits!