Many people lucky enough to find love twice in a lifetime end up entering into a kind of self discrimination from a tax perspective, but this can be avoided without disinheriting children.

If a couple were in a first marriage they would almost certainly leave their assets to the surviving spouse, with the provision that it be divided among children when that person passed away. In a second marriage, though, the thinking is that the money is going to the new spouse instead of to the kids. In addition, there is no assurance that the money will ever go to these children, as the survivor could will all the money to his or her children. So the hesitation to leave it to a new spouse is understandable.

In the first case, however, registered money would be able to continue to grow tax-free, with no negative tax consequence until the death of the survivor. In the second case the tax hit comes sooner, and the estate is eroded by as much as half.

Consider another option for both spouses. Since the issue is making sure the kids get the assets when the first spouse passes away, consider buying insurance on one another for the after-tax value of registered funds, and willing the RRIF to your spouse. If each spouse pays the premiums for the other, the effect is that each is buying insurance for half price, since the registered asset will not be reduced when it passes to them. So who pays for the other half? Revenue Canada of course, because they have to wait for their money!

The other matter discussed above had to do with the certainty that the money would be paid to the children, but if they are named as beneficiaries, the money must be paid to them by law, and avoids probate fees as well.

One last consideration may be for both spouses To buy an amount equal to the future RRIF balance. This way, the kids end up the winners, since the effect for all the kids will be inheriting 100% of the funds without any taxes payable.

Call your Strategic Edge advisor to get the right structure and the very best rates available.