Even though Canadian politicians can’t agree on how to save the middle class, that doesn’t mean middle-class folks can’t save themselves from a huge tax bill on their estates. Once a last surviving spouse dies, for instance, a $500,000 RRSP or RRIF would be taxed as income on the person’s final tax return, meaning more than $200,000 would go to the tax man—and not to your family. A simple tactic for avoiding this is to slowly move money into TFSAs or regular taxable accounts to avoid a massive tax hit on your final return. You can also set up trusts for your children and grandchildren to average in taxable income at potentially lower marginal tax rates. That, or name your heirs as beneficiaries on accounts or give money to them while you’re alive to avoid probate fees.
Tax savings: Up to 40% of your RRSPs, in the above example.