I have a situation where one of the higher income spouses has contributed to his spouse’s RRSP. He hasn’t done any contributions in the last three years.
The beneficiary spouse turned 50 and would like to withdraw the amount from RRSP to pay down the mortgage on the house. Would the amount of withdrawal be taxed in contributing spouse’s hands?
Does she first need to become an annuitant of this RRSP?
thank you
She is the annuitant by default
Any withdrawals equal to the amount of contributions of the spouse within the first 3 years of contribution are taxed in the contributors hands in the year of withdrawal.
This provision is meant to disallow income splitting between higher and lower spouses.
Short answer: if you’re past the 3 year mark, you’re safe.
I suggest you read the information found here:
It’s not " contributions . . . the first 3 years of contribution. It’s contributions in the year of the withdrawal and the two, preceding years that are subject to attribution.
Back in the early days of spousal RRSPs, a former boss of mine told his clients substantially what you wrote, and caused all sorts of grief.
I agree. He should have said, “Any withdrawals…within the LAST 3 years…” are attributed back to the contributor. Maybe he was thinking, “…first 3 years after the last contribution…”?
His “short answer” is still correct.
I implied that there’s a 3 year running window
It’s contributions in the year of the withdrawal and the two, preceding years that are subject to attribution.
This ^^. Correct.