Spousal RRSP Contributions
Spousal RRSP contributions can be an effective income-splitting vehicle. They offer an opportunity for one spouse to contribute to an RRSP of the other spouse up to the contributor's personal RRSP Contribution Room.
When a contribution is made to the Spousal RRSP, the contributor receives a tax deduction.
Snap Projections tracks all of this for you, automatically. However, accounts of type Spousal RRSP are currently not part of the automatic Cash Flow Management (CFM) Contribution logic. You will need to make spousal RRSP contributions manually on the Personal Planning page as detailed below.
In this article:
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Adding a Spousal RRSP Asset
Under Scenario Setup ->Assets for the spouse receiving contributions, click Assets. Select Add Financial Asset and choose the Type of Spousal RRSP. Enter the asset's Value and the Asset Allocation.
Under Scenario Setup ->Assets for the contributing spouse, click the RRSP/RRIF header.
Adjust the RRSP/RRIF Contribution room if necessary.
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Entering Spousal RRSP Contributions
In this example, John is the contributing spouse and Jane owns the Spousal RRSP.
On Jane's Planning page, the Spousal RRSP is listed under the Financial Assets. There are 2 Contribution columns for Spousal RRSPs. The first is for Jane's contributions and withdrawals and the second, labelled Spousal Contribution, is for John's contributions. The contributing spouse receives a tax deduction for the amount displayed under the Spousal Contribution column.
In this example, John contributes $10,000 annually to Jane's Spousal RRSP. This amount is entered using the pop-up window for editing values on the Planning page.
On John's Planning page, the Spousal RRSP Contribution is displayed under Transfers. Spousal RRSP Contributions can also be edited here. Any updates you make on one spouse's Planning page will be reflected on the other spouse's Planning page.
To see the reduction in taxable income for the contributing spouse, you can open the Taxable Income Details. Click the blue menu icon in the Taxable Income header.
In this example, John's taxable income is reduced by $14,000. (He has a $4K contribution to his own RRSP and a $10K contribution to Jane's Spousal RRSP.)
Jane benefits from the $10,000 per year contribution and there is no change to Jane's tax position. This is the desired outcome as the tax deduction is realized on the side of the contributing spouse.
Note: Attribution rules
If the funds are withdrawn within 3 years of a contribution to a spouse's RRSP, all or part of the withdrawal from the spousal RRSP will be taxed as income to the contributing spouse.
Snap does NOT track the attribution rule at this time. Instead, it will try to withdraw from Non-registered or TFSA accounts by default before tapping into the Spousal RRSPs. This means that in the vast majority of cases, the attribution rules won't be ever triggered.
As a planner, you should pay attention to and not withdraw any funds from the Spousal RRSP within 3 years of contributions as the attribution rules may be triggered.
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Spousal RRSP Contributions in the Report
In the Cash Flow Projection section of the report, spousal RRSP contributions are displayed under the Other Cash Flow column for the contributing spouse. In this example, John is the contributing spouse to Jane's Spousal RRSP.
Here is John's Cash Flow Projection table where his RRSP contributions are displayed under the RRSP/RRIF column for $4K annually, and his Spousal RRSP contributions are displayed under Other Cash Flow.
In Jane's Cash Flow Projection table, there is no cash inflow for the RRSP/RRIF since John was the one to make the contribution and her cash flow is not affected.
Jane's Net Worth Projections table tracks the increase in value of the Spousal RRSP based on John's contributions.
