2015 Federal Budget and Estate Planning


The Federal Budget of April 2015 announced an increase of TFSA contribution limit from $5,000 per person per year to $10,000 per person per year. 

The middle class are likely to be the biggest beneficiaries of the expansion of the TFSA and through proper estate planning could see significant financial benefits.


Tax Savings for the Middle Class

A recent article in the Financial Post by Ted Rechtshaffen and Asher Tward of TriDelta Financial created a model in which a middle-class couple could parlay this TFSA expansion to create a tax saving of over $1 million!


Essentially, the TriDelta model is based on the following estate planning considerations:

•              A contribution to an RSP results in an immediate tax deduction.  However, when the funds are withdrawn from the RSP, the capital and any capital gains and income are all subject to income tax.

•              When one spouse dies, his/her RSP can roll tax free to the surviving spouse or will become fully taxable as income in the estate at a tax rate of up to 47%.

•              Following a spousal rollover and age 71, the surviving spouse is required to withdraw an amount between 5-20% from the RRIF and will pay tax on the amount of the withdrawal.  This can significantly increase the marginal tax rate on the funds, due to increased income, a higher marginal tax rate and the loss of the personal exemptions and tax credits of one taxpayer.  After the spousal rollover, income splitting is lost, and the minimum withdrawals from the combined RRIF result in higher taxes.

•              Finally, when the surviving spouse dies there are no further rollovers and the remaining balance in the RSP/RIF becomes fully taxable as income.  This can be a significant tax burden to the estate.


TFSAs and Estate Planning

The use of TFSAs can significantly decrease the tax burden to the estate.

•              TFSAs are tax free.  They are not subject to tax when funds are withdrawn or on the death of either spouse.

•              TFSAs are not taxable in the estate.

•              These tax advantages apply whether an individual contributes the maximum or just any amount that they can afford.

From an estate planning perspective, it is important to consider more than the immediate tax deduction which results from an RSP.  It is important to balance and consider:

•              the availability of a spousal rollover;

•              the annual tax implications to the surviving spouse;

•              the tax implications to the estate.



Estate planning is about creating and protecting your estate during your lifetime and passing your assets to your family tax efficiently.

The benefits of contributing to a TFSA extend to the middle class and to anyone who chooses to save money using RSPs and/or TFSAs.  Whether an individual contributes the maximum or just any amount that they can afford, they will see benefits in the form of tax free savings to be used at any later point in life, whether pre or post retirement.


Prepared by Ismail Barmania of Barmania-Lawyers