Registered Retirement Savings Plans (RRSP's) and Registered Retirement Income Fund (RRIF's) offer tax deductions and tax sheltering as they grow. However, when withdrawals are made the income is taxed. When a married spouse dies, the value of the RRSP's/RRIF's passes on to the other spouse tax free. But when the last spouse dies, the remaining funds trigger taxation to the estate.
However, you can eliminate taxation, conserve your hard earned estate and make a lasting contribution to the Legacy for Life Fund with a joint-last-to-die life insurance policy. A joint-last-to- die insurance policy, which may be obtained even if one spouse is not insurable, works this way. The proceeds are payable to the estate. The estate makes a bequest for the value of the life insurance amount and in doing so receives a tax deduction for the charitable gift. This offsets taxation on the value of the RRSP's/RRIF's, which became de-registered upon death of the last spouse. Thus, the value of the RRSP's/RRIF's remains in the estate.